Foreign dividends with tax taken off abroad

You are UK resident and receive dividends from companies outside the UK — and the country the dividend comes from took some tax off before paying you.

UK residents normally pay UK tax on foreign income, including foreign dividends. Foreign income is anything from outside England, Scotland, Wales and Northern Ireland; the Channel Islands and the Isle of Man count as foreign.

Foreign dividends are taxed like other dividends. For 2025 to 2026 the first £500 of dividend income is covered by the dividend allowance; above it the rates are 8.75%, 33.75% and 39.35% in the basic, higher and additional rate bands.

Relief for the foreign tax. If you have already paid tax abroad on the dividend, you can usually claim Foreign Tax Credit Relief (FTCR) when you report it on your return. HMRC helpsheet HS263 sets the credit as the lower of:

• the foreign tax paid — or, where the double taxation agreement (DTA) with that country limits it, the amount the agreement allows
• the UK tax on that dividend

The UK tax on a dividend is the difference between the UK tax due with it and without it. Each dividend from each source gets its own calculation, rather than adding them together.

So you may not get relief for all the foreign tax. You get less where the agreement sets a smaller amount, or where the dividend would have been taxed at a lower rate in the UK. Tax paid abroad above what the agreement allows is not credited in the UK; HS263 says it may be recoverable from the foreign tax authority. Where the dividend is within your dividend allowance and so has no UK tax on it, FTCR cannot be claimed on it.

Some cases have no FTCR at all. If the DTA says you must claim the tax back from the other country, you cannot claim FTCR in the UK. The SA106 notes also list countries whose taxed dividends cannot get FTCR. And if there is no DTA, or it does not cover that tax, relief is only available if the foreign tax matches UK Income Tax or Capital Gains Tax.

HS263 also describes 'deduction relief', where the foreign tax reduces the income charged in the UK instead of being credited against UK tax.

• Dividend vouchers or broker statements showing, for each dividend, the country, the amount before tax and the foreign tax taken off.
• The exchange rate you used for each dividend — amounts are converted into pounds using the rate at the time the income arose.
• Any paperwork from the foreign tax authority about tax you have reclaimed there.

Foreign dividends go on the 'Foreign' pages (SA106), in the 'Dividends from foreign companies' section. For each country you enter, in pounds: its 3-letter country code, the dividend before any tax was taken off, and the foreign tax taken off — the lower of the tax actually withheld and the amount the DTA allows. You put an ‘X’ in the column for claiming FTCR.

You do not have to work out the relief yourself: the SA106 notes say HMRC will do it if you complete the other relevant boxes and send your return by the filing date. Box 2 is only for people who work out their own total FTCR, using HS263.

Taxseas covers:

• Foreign income
• Dividends from shares or funds

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