Foreign Dividends & Annual Allowance

I've just reported some foreign dividends which are under the £2000 annual allowance limit but have since noticed that my taxable income has increased. What is the purpose of the annual allowance then ? Until now I've assumed that dividends inside the allowance are tax free but the HMRC calculation suggests otherwise (to my untrained eye).

Hi,

Combined UK and foreign dividends below £2000, are not subject to tax. They will appear in the calculation as being taxed at 0%.  

This remains the case whether you pay higher rate tax or not.

Thank you/

Hi HMRC, Situation: • I have several sources of Australian income – not just dividends. • All my dividends come from Australia. • For 2022-2023, my gross amount of dividends is under £2000. • Currently, my Australian dividends are added towards my taxable income. Question: • Should I be claiming Foreign Tax Credit Relief if I'm within the £2000 annual allowance? Thanks in advance.

Hi Aussie82

No. foreign tax credit relief is only applicalbe if UK tax is due on the same source of income.

Thank you