Tax on Foreign Savings and Other Investment Income

What counts as overseas savings and investment income

Any income from outside England, Scotland, Wales and Northern Ireland is treated as overseas income for UK tax purposes. This includes the Channel Islands and the Isle of Man, which have their own tax systems separate from the UK. If you are UK resident, you must still report income from these locations to HMRC.

When it comes to savings and investments specifically, overseas income covers several common types of return:

• Interest from foreign bank or building society accounts
• Dividends from shares in non-UK companies
• Rental income from property located abroad
• Other investment returns such as bond interest or distributions from overseas funds

If you hold any of these types of investment outside the UK, you will usually need to report the income to HMRC, even if tax has already been deducted in the country where the investment is held.

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How UK tax applies to foreign investment income

As a UK resident, you are normally taxed on your worldwide income. This means overseas savings and investment income is added to your other income when calculating your tax liability for the year. However, if you are UK resident but non-domiciled, different rules may apply. You might be able to use the remittance basis, which means you would only pay UK tax on foreign income that you bring into the UK. This is a complex area and professional advice is recommended.

Foreign interest is treated in the same way as UK savings interest. You may be able to use your Personal Savings Allowance, which lets basic rate taxpayers earn up to £1,000 in savings interest tax free, or £500 for higher rate taxpayers. Check GOV.UK for current rates and thresholds, as these can change with each tax year.

Dividends from foreign companies are generally subject to the same tax rules as UK dividends, though foreign exchange movements and withholding taxes can add complexity. The dividend allowance applies regardless of where the shares are held. Any amount above the allowance is taxed at dividend rates, which differ from standard income tax bands.

Rental income from overseas property is taxable in the UK, though you can deduct allowable expenses in the same way you would for a UK rental property. The rules on what qualifies as a deductible expense can be found in HMRC's guidance on property income.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Avoiding being taxed twice

In many cases, the country where your investment is based will also want to tax the income at source. This could leave you paying tax twice on the same money.

The UK has double taxation agreements with a large number of countries. These treaties set out which country has the primary right to tax certain types of income, and they often allow you to claim relief in one country for tax paid in the other.

If you have paid foreign tax on your savings or investment income, you can usually claim Foreign Tax Credit Relief when completing your Self Assessment return. This reduces your UK tax bill, but the relief is capped at the lower of the foreign tax paid or the UK tax liability on that specific foreign income.

Some countries do not have a double taxation agreement with the UK. In these situations, you may still be able to claim Unilateral Relief, which works in a similar way. Details of countries covered by agreements and how to claim relief are available on GOV.UK.

Reporting overseas income to HMRC

If you receive foreign savings or investment income, you will normally need to complete a Self Assessment tax return. There is a specific section for foreign income where you should declare amounts received, any foreign tax paid, and relief you wish to claim.

All figures should be converted to pounds sterling. HMRC accepts the use of the exchange rate on the date you received the income, or an appropriate average rate for the tax year. Keep records of the rates you use.

If you are unsure whether you need to declare certain income, or how to complete the foreign pages of your return, HMRC's guidance on foreign income provides detailed instructions. You can also use the Self Assessment helpline if you need to speak to someone directly.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our HMRC Red Flag Checker lets you find out which areas of your finances HMRC is most likely to query, what you should be declaring, and roughly what you may owe. Try it now →