The Lemon Fool

Just realised I have to complete the foreign income pages this year as gone over 2k mainly in dividends on Vanguard etfs (IRL). These have no tax deducted so no impact as I assume will just be same tax as uk income. However I also have a few dividends from US, Canada and Guernsey mostly small ( below £10). Are these set against UK tax to avoid double taxation ? I am in UK and pay UK tax.

Forgot to clarify that the US , CAN and Guernsey divs have tax deducted.

NeilOne wrote:Just realised I have to complete the foreign income pages this year as gone over 2k mainly in dividends on Vanguard etfs (IRL). These have no tax deducted so no impact as I assume will just be same tax as uk income. However I also have a few dividends from US, Canada and Guernsey mostly small ( below £10). Are these set against UK tax to avoid double taxation ? I am in UK and pay UK tax.

NeilOne wrote:Forgot to clarify that the US , CAN and Guernsey divs have tax deducted.

The Guernsey ones have tax deducted? That surprised me, are you sure? I have a Guernsey based IT and that doesn't have tax deducted. Possibly different with a single share in a Guernsey based company.

I'm not sure I can help with your query, this is one section of SA that I always find confusing!

NeilOne wrote: However I also have a few dividends from US, Canada and Guernsey mostly small ( below £10). Are these set against UK tax to avoid double taxation ? I am in UK and pay UK tax.

You may well find that some or all of the foreign tax deducted can be treated as a part payment of any UK taxation due.

NeilOne wrote:Just realised I have to complete the foreign income pages this year as gone over 2k mainly in dividends on Vanguard etfs (IRL). These have no tax deducted so no impact as I assume will just be same tax as uk income. However I also have a few dividends from US, Canada and Guernsey mostly small ( below £10). Are these set against UK tax to avoid double taxation ? I am in UK and pay UK tax.

Yes, foreign dividends are taxed as UK income. But foreign withholding tax can be used to reduce the UK tax due on the same dividends.

The catch is that HMRC will only accept the withholding tax up to the level of UK tax that you would have paid on a particular dividend.

So if you got caught for 25% Canadian withholding when you're only liable for 8.75% UK dividend tax, then you can only use 8.75% leaving the other 16.25% unused. But all of the Canadian withholding tax would count towards your UK dividend tax if you are a higher rate taxpayer.

Sorry , yes you are correct it is just the UA and Canada that deduct tax (of my holdings).

XFool wrote:

NeilOne wrote:Forgot to clarify that the US , CAN and Guernsey divs have tax deducted.

The Guernsey ones have tax deducted? That surprised me, are you sure? I have a Guernsey based IT and that doesn't have tax deducted. Possibly different with a single share in a Guernsey based company.

I'm not sure I can help with your query, this is one section of SA that I always find confusing!

Thanks, I can see there is a section for foreign tax credit relief so will look at that.

SalvorHardin wrote:

NeilOne wrote:Just realised I have to complete the foreign income pages this year as gone over 2k mainly in dividends on Vanguard etfs (IRL). These have no tax deducted so no impact as I assume will just be same tax as uk income. However I also have a few dividends from US, Canada and Guernsey mostly small ( below £10). Are these set against UK tax to avoid double taxation ? I am in UK and pay UK tax.

Yes, foreign dividends are taxed as UK income. But foreign withholding tax can be used to reduce the UK tax due on the same dividends.

The catch is that HMRC will only accept the withholding tax up to the level of UK tax that you would have paid on a particular dividend.

So if you got caught for 25% Canadian withholding when you're only liable for 8.75% UK dividend tax, then you can only use 8.75% leaving the other 16.25% unused. But all of the Canadian withholding tax would count towards your UK dividend tax if you are a higher rate taxpayer.

Hargreaves Lansdown don't give the country totals just the individual amounts which is a pain.

NeilOne wrote:Thanks, I can see there is a section for foreign tax credit relief so will look at that.

If you have a foreign tax deduction you should enter the country, the gross dividend amount and check the box to claim foreign tax credit relief. You are then presented with a drop-down menu for the percentage. This choice I don't really understand fully*and whilst all percentages are selectable only some percentages are accepted, perhaps according to the country. Regardless of the choice the tax computation always seems to reflect that, as SalvorHardin points out, you can only claim the amount you would pay on a normal UK dividend (I assumed that also applies if you are on a rate above the 8.75% 'basic rate') which it seems to work out correctly. Oddly, perhaps, I believe that also applies if one was to select a lower %age of tax deducted than 8.75%. Similarly oddly, some of the %ages that you would expect to work for the country concerned (e.g. because that's the actual %age deduction) don't seem to be accepted. If one has the inclination one can play with this and see the %ages which are being accepted against the line entry in the table of entries at the bottom of the page.

Re: HL - HMRC have a 'helper' entry-form you can use to put in the individual entries - see the respective foreign page.

* I think one is supposed to use the %age figure applicable for the respective country as given in the double-taxation treaty, where one exists.

NeilOne wrote:... you are correct it is just the UA and Canada that deduct tax (of my holdings).

You've lodged a W8-BEN? To reduce the US tax...

V8

yes would not be able to buy USA shares otherwise

88V8 wrote:

NeilOne wrote:... you are correct it is just the UA and Canada that deduct tax (of my holdings).

You've lodged a W8-BEN? To reduce the US tax...

V8

I have gone through this and submitted now but the actual percentage to use is not restricted to just the correct one.

BobGe wrote:

NeilOne wrote:Thanks, I can see there is a section for foreign tax credit relief so will look at that.

If you have a foreign tax deduction you should enter the country, the gross dividend amount and check the box to claim foreign tax credit relief. You are then presented with a drop-down menu for the percentage. This choice I don't really understand fully*and whilst all percentages are selectable only some percentages are accepted, perhaps according to the country. Regardless of the choice the tax computation always seems to reflect that, as SalvorHardin points out, you can only claim the amount you would pay on a normal UK dividend (I assumed that also applies if you are on a rate above the 8.75% 'basic rate') which it seems to work out correctly. Oddly, perhaps, I believe that also applies if one was to select a lower %age of tax deducted than 8.75%. Similarly oddly, some of the %ages that you would expect to work for the country concerned (e.g. because that's the actual %age deduction) don't seem to be accepted. If one has the inclination one can play with this and see the %ages which are being accepted against the line entry in the table of entries at the bottom of the page.

Re: HL - HMRC have a 'helper' entry-form you can use to put in the individual entries - see the respective foreign page.

* I think one is supposed to use the %age figure applicable for the respective country as given in the double-taxation treaty, where one exists.

One of the maxima is the withholding tax per cent specified by the Double Tax Treaty. For example if say 30% has been withheld but the treaty specifies 20%, you can only claim a credit up to 20%.

NeilOne wrote:I have gone through this and submitted now but the actual percentage to use is not restricted to just the correct one.

Quite so, as I wrote. In fact, if one considers 8.75% to be the correct one, it doesn't even exist within the list (AFAIR).

bluedonkey wrote:One of the maxima is the withholding tax per cent specified by the Double Tax Treaty. For example if say 30% has been withheld but the treaty specifies 20%, you can only claim a credit up to 20%.

Indeed that is a general rule where a Double Taxation Treaty exists. However for dividend income where the taxpayer's situation results in dividend tax at 8.75%, when the claim is currently limited to 8.75%. (The o/p was concerned about foreign dividends.) Other forms of foreign income may be treated differently.