How does Foreign Tax Credit Relief work on UK tax?

Full answer

UK residents are generally taxed on their worldwide income and gains. If that income has also been taxed abroad, double taxation can occur, and Foreign Tax Credit Relief (FTCR) is the main mechanism that prevents it. It affects UK residents with overseas employment, foreign dividends, rental income from abroad, or gains on foreign assets. The core rule: you can credit foreign tax against your UK tax on the same income, but only up to the amount of UK tax that the income generates. So the relief is the lower of (a) the foreign tax actually paid, and (b) the UK tax due on that slice of income. If the foreign country taxed at a higher rate than the UK, the excess foreign tax is generally not refundable -- the UK tax on that income just falls to zero. Worked illustration of the mechanism: suppose you receive foreign income on which GBP 1,500 of foreign tax was paid, and the UK tax on that same income works out at GBP 2,000. You claim FTCR of GBP 1,500, leaving GBP 500 of UK tax to pay. Reverse the figures -- GBP 2,000 foreign tax against GBP 1,500 UK tax -- and the credit is capped at GBP 1,500, so no UK tax is due but you do not get the GBP 500 difference back. A double taxation agreement between the UK and the other country can reduce the foreign rate at source, and you should only claim FTCR for the lower treaty rate where one applies, not for extra foreign tax you could have reclaimed abroad. You claim FTCR through the foreign pages of your Self Assessment return. Use the income tax and dividend tax calculators to work out the UK tax on the foreign income first, since that figure sets the ceiling on your relief. For 2026/27, foreign dividends feed into the UK dividend rates of 10.75%, 35.75% and 39.35%.

Try the calculator