How are foreign dividends taxed in the UK?

Full answer

UK residents who receive dividends from overseas companies must pay UK income tax on those dividends, subject to double tax relief for any foreign tax already withheld. UK tax rates on dividends (2026/27): - Within the dividend allowance (£500): 0% - Basic-rate band (above £500): 8.75% - Higher-rate band: 33.75% - Additional-rate band (above £125,140): 39.35% How foreign dividends fit in the UK tax calculation: - Dividends are treated as the top slice of income (after non-savings income and savings income). - The £500 annual dividend allowance applies to all dividends (UK and foreign combined). Double Tax Relief (DTR): - Many countries withhold tax at source on dividends paid to non-residents (e.g., 15% withholding tax on US dividends under the US-UK tax treaty). - You can claim relief for foreign tax paid to avoid being taxed twice. - The relief equals the lower of: (a) the foreign tax withheld, or (b) the UK tax due on the same income. - Example: US dividend £1,000, foreign withholding tax £150 (15%). UK higher-rate tax: £1,000 x 33.75% = £337.50. DTR: £150. Net UK tax: £337.50 - £150 = £187.50. How to claim DTR: - Via the foreign income pages of your Self Assessment tax return (SA106 form if paper). - You need evidence of the foreign tax paid (dividend statement or broker statement showing withholding tax deducted). ISA shelter: - Foreign dividends received inside a Stocks and Shares ISA are sheltered from UK tax. However, foreign withholding tax may still apply at source and is not recoverable in an ISA. US dividends via UK treaty: - Under the US-UK double tax treaty, withholding is reduced to 15% on portfolio dividends (or 5% for substantial holdings). Without a treaty claim (Form W-8BEN), the default US rate is 30%.

Related guides

• Foreign Income Tax Guide
• Self Assessment Guide

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