Home > Savings & Investments > Tax on Foreign Savings and Other Investment Income

Tax on Foreign Savings and Other Investment Income

By: J.A.J Aaronson - Updated: 15 Feb 2015 | comments*Discuss
 
Tax Foreign Savings Investment Income

As far as savings and investments are concerned, the tax system may seem complex enough when you are dealing solely with UK-based financial affairs. When one becomes involved in overseas investment, however, things appear to become even more convoluted. But with a little forethought, there is no reason why it should become problematic.

Overseas Income

Any income that comes from territory other than England, Northern Ireland, Scotland or Wales is counted as ‘overseas income’. It is important to note that income derived from activities in the Channel Islands and the Isle of Man constitutes overseas income. This article is concerned specifically with overseas savings and investment income, which includes any interest that has accrued on bank or building society accounts, rent and other payments associated with property, and dividends from shares.

In the majority of cases, you are likely to find that your savings and investments will be subject to taxation in the country in which they are held. In the past, this would have meant that individuals who have such arrangements abroad would be required to pay tax in both the country in question and in the UK. In order to tackle this problem, the British government has signed ‘double taxation agreements’ with a large number of countries. If your savings and investments are held in a country with which the UK has a double taxation agreement, you will be eligible for some tax relief.

Relief Limits

If you are eligible for relief under the double taxation scheme, the amount that you can claim is calculated with reference to the terms of the agreement with the country in question. Regardless of the country, however, you will be eligible for relief on either the minimum amount due in the foreign country or on the maximum amount due in the UK – whichever is lower. As a result, you will still need to be familiar with the relevant tax codes of the countries in which your investments are held.

It is also important to note that dividend income is treated slightly differently to other forms of savings and investments for the purposes of overseas income. In these cases, countries with which the UK has double taxation agreements are obliged to levy tax at a set rate for UK citizens, known as a ‘withholding tax’.

When applying for relief on tax paid on this income in the UK, you will therefore only be able to claim for this amount. It is fairly common, however, for the countries in question to charge more than the agreed withholding rate. The correct rates are all outlined in the appendices to the Self Assessment form, but HM Revenue & Customs cannot deal with overpayment of foreign taxes. Therefore, if you think you have paid too much tax abroad, you must approach the relevant foreign tax office directly.

Overseas income can only be paid via Self Assessment. There is a dedicated section in the Self Assessment form that deals solely with overseas income, and this should be completed thoroughly. The list of countries with which the UK has double taxation agreements is available on the Directgov website. If you have already paid tax to a country on this list, you should approach your own tax office for specific advice on how best to act.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Cat
    Re: How Will My Second Job Be Taxed?
    Will I still get taxed on my second job if that job's income plus my first one (and any previous one I had that year) amounts…
    13 December 2018
  • LucianoA
    Re: Should I be Paid Mileage Allowance?
    Hi, My employer doesn't pay any mileage allowance, however they offer a company car scheme. My problem is, if I…
    6 December 2018
  • Lou
    Re: How Will My Second Job Be Taxed?
    Hi, I work full time my annual income is 25,000. I am considering taking a second job, how would this effect the amount of…
    14 November 2018
  • Rjrjrj
    Re: How Will My Second Job Be Taxed?
    Hi just need advice on my 2nd job im currently working full time @37 hrs per week min wage and maybe starting 2nd job @16 hrs…
    9 November 2018
  • carol
    Re: What is My Tax Code?
    I have one job permanent but get paid 32 weeks a year. another job in the same place zero hours contract, paid 35 weeks a year I would…
    9 November 2018
  • Ellie
    Re: How Will My Second Job Be Taxed?
    We are currently on working tax credits. My husband earns 8200 and has taken a zero hours job earning roughly 2000 a year .…
    7 November 2018
  • Mikey
    Re: Claiming Tax Relief on Mileage
    I work on building sites as an employee but get no mileage allowance or extra money to cover fuel and travel in my own vehicle.…
    7 November 2018
  • tink
    Re: Can Tax Allowance Be Claimed on Work Clothes?
    Hi I work in a school as a family support worker and travel all over the Wirral supporting them in the…
    6 November 2018
  • Hellc98
    Re: Should I be Paid Mileage Allowance?
    My employer has refused to pay my mileage as they say I have not put my odometer readings on the claim forms. I have…
    5 November 2018
  • Kelly
    Re: What is My Tax Code?
    Hi, I earnt 9k and got taxed 1.1k so far in this tax year as I was on 35k for 3 months. Then I had 3 months of unemployment. And for the rest…
    31 October 2018