claim foreign tax credit relief

Dear HMRC I need to submit a tax return for year 2022-2023 as my total income ( foreign property rental income + UK state pension) has exceeded tax allowance. I have paid £1600 property tax to HONG KONG inland revenue for the tax year 2022-2023 because of the rental income in HK and I have worked out my payable tax to HM inland revenue is about £650. my question is can I still claim foreign tax credit relief for the £1600 as this figure is bigger than UK tax of £650? And if I can. How much can I claim back and how does it work? Is it foreign tax credit relief that I need to claim in order to avoid paying tax twice in two countries on the same taxable item? Many thanks for your help

Hi JessicaLove,
You can only claim Foreign Tax Credit Relief up to the maimum of what the UK tax is for the same source and from your figures this would only be the £650.
Any excess would then need to be recovered from Hong Kong.
Thank you. 
 

Thank you very much for your reply HMRC Admin 25. I have submitted a tax return for 2022-2023 and paid £1600 to HONG KONG inland revenue and iam about to file my tax return to the HM revenue for the same tax year. Do I choose to claim foreign tax credit relief on the tax return and do I need to provide a figure of how much I would like to claim? I have worked out my total tax due would be around £650 and I would also like to claim marriage allowance while filling the tax return online since my husband earned less than me. The new figure would be around £400 after allowance. Do I put £650 or £400 on how much I would like to claim for the tax relief or do I just put a tick on the box letting them know that I want to claim tax relief and dont need to provide a figure myself? Do I need to provide anything to support my foreign tax relief claim regarding on the tax I paid to HONG KONG inland revenue for example tax bill ? Many thanks for your help again

Hi,

Yes, you need to claim the Foreign Tax Credit Relief on the return.

As you are wanting to claim your husband's Marriage Allowance, he will need to submit the application prior to you submitting the tax retrun so that it shows in the calculation.

For the tax credit, you can only claim the amount that would be the UK tax for the same source of income which is not necessarily the total of tax paid in Hong Kong.

Thank you.

thank you again for the reply. I am filing my UK tax return and claiming foreign tax credit relief and came across with the question of:select rate of the tax credit relief allowed to set against your Liability to uk tax on that same income choose from 0%to 20%. I have already paid £1600 property tax to HK inland revenue for the residential property rental income at the rate of 15% and Hong Kong has double taxation Agreement with the UK but after searching under tax treaties.Instead of property income that I was looking for I could only found the rate of 15% and thats property income "dividends" . as I receive monthly rental income by cash should I also choose 15%? Many thanks for your help again

Hi JessicaLove,
You should select yes to declare foreign income and yes to claim foreign tax credit relief on capital gains.  
You need to declare the capital gain in the capital gains section and then also in the foreign section of fill in your return.  
As you are claiming relief for capital gains payments, the relief can be up to 100% of the foreign tax paid.  
If you are being asked to choose a percentage rate, you are in the wrong part of the tax return.  
On page 2 of 2 of foreign income details, you should tick yes to "Capital gains - foreign tax credit relief and Special Withholding Tax".  
This will bring up the section on capital gains for property.  
You should then tick the box for "Residential property and carried interest", to answer the questions on property disposal.
Thank you.

Hi thank you for your reply HMRC Admin 20. Iam not claiming foreign tax credit relief on capital gains iam claiming foreign tax credit relief on oversea residential property rental income and came across the question of select rate of percentage of the tax credit relief allowed to set against your Liability to uk tax on that same income which I paid £1600 to hk tax authority and that was property tax @15% for tax year 2022-2023 for gaining rental income only

Hi JessicaLove,
You can claim up 100% for this type of income.
However, the relief cannot exceed the actual UK tax due on the same source of income.
Thank you. 

Hello, a question related to this thread - I have capital gains from investments abroad that I need to declare, and want to claim tax relief for the tax deducted there (in Austria). Like the person who posted above, I had to select the relevant tax relief rate from the dropdown when entering the foreign income of up to 20% although the actual tax taken was around 40% (and separately for dividends received abroad, where it is around 10% - in some subsequent pages, the system suggests 0 tax relief, but then does generate a final tax relief figure in the calculation as per the rates I chose in the dropdown). You wrote "You should select yes to declare foreign income and yes to claim foreign tax credit relief on capital gains. You need to declare the capital gain in the capital gains section and then also in the foreign section of fill in your return." I have done this, but now my gross capital gains show up twice, once as a fully taxed additional income under "foreign savings", and then again in the capital gains overview (which includes UK capital gains and is taxed at the relevant 20% rate). So the foreign capital gains end up being taxed as income, and then again as capital gains (over the threshold). Might you be able to point out what I am doing wrong? Many thanks Michael

Hi,

In section 4, fill in your return, declare the foreign capital gains in the capital gains section. There are different sections such as residential property, listed share, unlisted shares and other property assets and gains. Choose the appropriate option and save and continue.  

Click on the foreign section. On page 2 of 2, you would tick the box "Capital gains - foreign tax credit relief and Special Withholding Tax" and save and continue. This will bring up the section where you declare your foreign capital gains and the tax paid.  

In the foreign section, tick the appropriate box relating to your capital gains, such as listed shares. As you fill in the remainder of your tax return, you will reach the section 6, view your calculation. It is in this section that you will include the foreign tax credit.

Thank you.

Hi, No matter which figure I put in, my tax return form still shows my foreign tax credit relief for a capital gain on a property sale as zero even though I have already paid 19% on this gain in Spain. I believe the UK has a double taxation treaty with Spain. On the sheet 'Capital gains - foreign tax credit relief and Special Withholding Tax' I have highlighted both the capital gain under 'Amount of chargeable gain under UK rules' and the Spanish CGT paid under 'Foreign tax paid: (optional)'. When I put in a figure indicating the tax paid under 'Tax adjustment to 2023-24 capital gains', whether without or without a minus figure, it makes no difference either. I'm not expecting to offset all my UK CGT liability (which, after all, is set at a higher rate) but neither do I expect to get zero relief back when I have already paid 19%. Am I missing something? Cheers

Hello, as William KD mentioned above, I'm having the same problem when completing my Self Assessment. I have completed the Capital Gains section for a Residential Property (which was sold in Spain), and I've completed the "Capital Gains - Foreign Tax Credit Relief..." form adding the "Foreign Tax Paid" (which is higher than the CGT tax owed in the UK). Unfortunately, when it comes to viewing the tax return calculations, it comes up with a calculated foreign tax relief of 0. I can override this by selecting "No" to the automatic calculation and entering my own foreign tax relief, but I feel like I must be doing something wrong somewhere? Any help would be much appreciated. Thanks

Hi William KD,
You need to ensure you have answered yes to the question - "Do you wish to claim Foreign Tax Credit Relief on Capital Gains".
This is on the first page of tailor your online tax return at section 3.
Thank you. 

Hi HMRC, Yes, I had already answered "yes" to the question - "Do you wish to claim Foreign Tax Credit Relief on Capital Gains". That's not the issue. Regards

Hi Eduardo Suarez,
You need to tailor your tax return at section 3 to state you are claiming Foreign Tax Credit Relief on a capital gain rather than normal tax credit relief.
How do I tailor my Self Assessment tax return?
Thank you. 

Hi HMRC Admin 25, Thanks for the suggestion. I have double checked and can confirm that I have tailored the return correctly at section 3, stating that I wish to claim Foreign Tax Credit Relief. Unfortunately this still doesn't work. Is it possible there is a bug in the application of Foreign Tax Credit Relief on Capital Gains on the self assessment online tool? It seems strange that several people are having the same issue. Regards.

Hi HMRC, Any further thoughts on the issue I and Eduardo S have reported? Best regards,

Hi Eduardo S,
For the foreign credit on Capital Gains, this is a separate question on page 1 of 3 on the tailor your return section so you need to ensure you have answered yes to the correct section.
Thank you.

Hi HMRC, again. For the record, there is also no change in the final figure when I also put a number with a minus figure under 'Losses and Adjustments', as per below, in addition to checking that foreign credit relief box in the Tailor your returns section. It still makes no difference. Is there a bug? Tax adjustment to 2023-24 capital gains Adjustment to Capital Gains Tax: (optional) -XXXXX Help about: Capital Gains Tax 65 - Adjustment to Capital Gains Tax This field will not apply to many people. The amount to enter is the amount of the adjustment needed to increase or reduce the amount of Capital Gains Tax. If the adjustment is intended to reduce the amount of Capital Gains Tax payable, put a minus sign in front of your figure. You must explain in your computations how any adjustment has been calculated. If your adjustment reduces the amount of Capital Gains Tax payable, include a minus sign before the adjustment figure. You may need to enter a net adjustment figure here if: your capital gains has Foreign Tax Credit Relief

Hello HMRC Admin 19 Response, thank you for your earlier response to my question - I have followed your advice "In the foreign section, tick the appropriate box relating to your capital gains, such as listed shares. As you fill in the remainder of your tax return, you will reach the section 6, view your calculation. It is in this section that you will include the foreign tax credit." I have added the tax paid on capital gains abroad as Foreign Tax Relief at the very end of the process, and the figure now appears under "minus Foreign Tax Credit Relief" in my final tax calculation, which is taken off the income tax liability before the capital gains calculation that appears further below. However, the capital gains tax paid abroad exceeds the UK capital gains tax I am liable for - do I need to limit the foreign tax relief claimed to the UK capital gains tax I would be liable for, or should I claim relief for the full amount paid abroad? Thank you Michael