Glossary · UK

What is Foreign Tax Credit Relief?

A UK tax relief that lets you offset tax already paid abroad against the UK tax due on the same foreign income or gains.

Full Definition

Foreign Tax Credit Relief (FTCR) prevents the same income or gain being fully taxed twice -- once overseas and again in the UK. If you are UK tax resident, you are generally taxable on your worldwide income; where that income has already suffered foreign tax, FTCR reduces your UK liability by the lower of the foreign tax paid or the UK tax charged on that same source. It is claimed through the foreign pages of a Self Assessment tax return. The available credit is capped at the UK tax on that item, so it cannot create a refund of foreign tax, and any double-taxation treaty between the UK and the other country can limit the foreign rate that qualifies. FTCR commonly applies to overseas dividends, rental income, employment income and capital gains. It matters because, used correctly, it avoids paying combined UK and foreign tax well above your normal UK rate. Keep evidence of the foreign tax actually paid.