FTCR on dividends

I have to recalculate the tax due for an earlier year. I have done extensive searches but cannot establish exactly how I need to calculate manually calculate the tax due, including the FTCR. The year is 2020/21. In this year I received substantial amounts of Foreign interest which took me to 40% tax rate. My foreign dividends were £2100, (15% USA withholding tax paid) and UK dividends were £100. None of the calculations I can find online, including the HMRC, seem to take account of the £2000 allowance and so suggest that FTCR of £2100 x 15% = £315 can be deducted from the very substantial overall tax bill for this year. Is this correct?

Hi reuters1953,
The £2000 allowance is taken into account in the final calculation.  
The credit is restricted to the maximum of UK tax on the same source.
Further guidance on how to work out the credit is at:- Relief for foreign tax paid (Self Assessment helpsheet HS263)
Thank you.

After very many hours I am still struggling to understand the figures that I should use and HMRC worked examples don't fully help me make the correct calculation. For this year only I am a higher rate tax payer with a dividend rate of 33.75%. Could someone please indicate the correct method or, are both allowable? There are foreign dividends of £2100 gross, £1600 net. The net amount is lower than expected as 25% was deducted from most of the payments because of incorrectly completed USA IBAN forms. (There are also UK dividends of £100 which are ignored for the simplified calculations below) Method 1: Declare the dividend amount received £1600 net with ‘Deduction Relief’. This is below £2000 annual dividend allowance - so no additional tax due. This also reduces total annual income over method 2. My annual income is just over £100,000, so the impact on basic allowance reductions is less than method 2. Method 2: Declare £2100. Tax due £100 x 33.75% = £33.75. FTCR is £315, so no additional tax due (but the £2100 takes me further over £100,000) Do both methods and calculations look correct? Presumably ‘deduction relief’ can be used on dividends? Thank you

Hi,

Please complete your tax return in full, declaring all income including UK and foreign dividends and ignoring any FTCR. Navigate through to the calculation and take a note of how the dividends are being taxed, the amount of dividend at the rate of tax. This calculation will show your UK tax liability without claiming a foreign tax credit. You then need to look at the double taxation treaty for each country you have dividends from:

Tax treaties

Each double taxation agreement will limit the amount of relief to a percentage of the dividend received, for example, USA is 15% for individuals. The FTCR will be the maximum of the foreign dividend at 15%, in the case of USA dividends, or the tax deducted on the dividends in the UK calculation. You can see guidance here:

Relief for Foreign Tax Paid 2023 (HS263) Updated 6 April 2023

Thank you.

Thank you for the reply. As this is an old 20/21 return, it is now not possible to enter on-line so we have to calculate manually. After following all of the guidelines, worked examples etc I am still not clear whether the FTCR can be applied to the total of foreign tax payable or only to the amount over the £2000 allowance Thank you

Hi reuters1953,
As the tax return cannot be submitted online, you will need to use a paper tax return.
Archived tax returns and supplementary pages can be found at:
Tax return for Self Assessment.
Supplementary pages can be found at:
Self Assessment tax return forms
FTCR is calculated by referring to the amount charged to UK tax on the income.
Where UK tax is more than the foreign tax, the relief can be up to 100% of the foreign tax paid.
Where UK tax is less than the overseas tax, the relief is up to the UK tax paid.
Thank you.