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Posted Mon, 11 Dec 2023 09:42:57 GMT by Paola15
Hello, I am a UK resident and tax payer.
I hold shares of an American company, for which I receive dividends (>£2000 in a tax year). These dividends are paid as cash into my brokerage account, based in the US and in USD. I have never transferred this money into my UK bank account, neither re-invested them (for example for purchasing more shares). So far I have declared these dividends when filling the Self Assessment as foreign income, in the section specific for Income from overseas sources (Dividends from foreign companies). Before getting into my brokerage account, a US Federal tax of 15% is withheld. I have the following questions: Question 1. Do dividends that are neither invested nor transferred to a UK account count as income? Am I supposed to declare them in the Self Assessment and pay income tax on them? If I decide to reinvest them directly from the brokerage account, are they still considered as income and taxed at the income tax rates? Question 2.
 Assuming the answer to question 1 is that foreign dividends, in my circumstances as described above, are taxed as income. In all my self assessments, the foreign dividends I’ve declared have been taxed at the higher rate (32.5%). I just found out about the tax relief claim thanks to the Double Taxation Treaties between the UK and the US. Is it correct I can claim Foreign Tax Credit Relief on income from foreign dividends? If so, can I claim a refund of what I paid extra for the past years? Question 3. Am I correct that I can claim 15% of the US tax I paid and therefore I should just enter 15% in the appropriate field when filling the Self Assessment?
Posted Fri, 15 Dec 2023 13:24:53 GMT by HMRC Admin 20
Hi Paola15,
As a UK resident, you are taxable on your world-wide income, whether or not it is remitted to the UK.  
This included dividends that are neither invested nor transferred to a UK account count as income. These dividends would be declared in the foreign
section (SA106), in pounds sterling and an appropriate tax credit, which varies from country to country, is claimed against the foreign tax paid.
Legislation demands that tax is always calculated in a set order.  The dividends will be taxed after employment /self employment income, pensions including
state pension and bank interest are taxed; so the dividend rate could be any combination of 8.75%, 33.75% and 39.35%, depending on the amount of income goes
before the dividends.  
You can amend previously submitted tax returns.  You can amend 21/22 and 22/23 tax returs, with the last date for 21/22 being 31 January 2024.  For 19/20 & 20/21,
you will need to submit in writing, an overpayment relief claim, following the gudiance at (SACM12150 - Overpayment relief: Form of claims).  
To work out the foreign tax credit, you need firstly to work out your UK tax liability without the foreign tax credit, to determine the amount of tax payable on dividends.
 Next you work out the percentage of tax relief that is permitted for each country the dividends relate to.  This sum can then be claimed as a foreign tax credit.  If you submit your tax return on time, HMRC can work this out for you if you prefer.
Thank you.

Posted Wed, 20 Dec 2023 18:50:37 GMT by Paola15
Hello and thank you for your answer. For this year's Self Assessment, I see in the Foreign section, when entering the dividends details, there are two fields for entering the foreign tax paid (in my case, US Federal tax): - One is the “Special Withholding Tax and any UK tax taken off”, and if I fill this field with the amount of US tax I paid, I can see this is subtracted from the total tax amount I owe in the final calculation, classified in the “Tax deducted” part as “Foreign income”, and in this case the Self Assessment says I can claim £0 relief. - The second way to enter the foreign tax I paid is the "Foreign tax" field. If I use this one instead of the "Special withholding tax" then I have to tick the "I want to claim Foreign Tax Credit Relief" to have the value subtracted from the total I owe, and in this case in the final calculation this amount shows up as "Foreign Tax Credit Relief". I imagine the correct one to use in my case is the latter, the "Foreign tax" field, but given that by using the Special Withholding tax field the amount is automatically deducted, may I ask what is the difference between the two? Thank you.
Posted Tue, 02 Jan 2024 11:10:13 GMT by HMRC Admin 21
Hi Paola 15
Special Withholding Tax was an amount of tax taken off certain payments to UK residents (in addition to foreign tax). 
It can be set against your UK tax liability or repaid to you if the amount exceeds your liability for that year. This will only now be relevant if you’re taxable on the remittance basis and are remitting income relating to earlier years where SWT was withheld.
If you are not claiming the remittance basis then you should claim foreign tax credit relief instead.
Thank you.

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