Foreign Savings

Savings income from payers outside the UK may be treated differently.

As no UK tax will have been taken by the payer, the savings income will be fully taxed in the UK.  However, foreign tax may have been paid on the income, in which case a deduction for that foreign tax may be available against your UK tax liability.

If the UK has signed a double tax treaty with the source country there may be a limit to how much tax the source country is allowed to charge.  If this is the case, credit against our UK tax will be restricted to the ‘treaty rate’ and any overpayment of foreign taxes must be reclaimed from the other country’s tax authorities.

Specifically, when thinking of dividends from foreign payers, the 10% notional UK tax credit may not be available unless the double tax treaty with the source country includes a non-discrimination clause or the payer is located within the EU (due to general EU non-discrimination laws).

Further information about Foreign Savings Income can be found on the HMRC website at: http://www.hmrc.gov.uk/taxon/foreign.htm.