Paying tax on foreign income (specifically dividends from US shares)?

wookie6

Hi,

Looking at https://www.gov.uk/tax-foreign-income/paying-tax it says:

You usually need to fill in a Self Assessment tax return if you’re a UK resident with foreign income or capital gains. But there’s some foreign income that’s taxed differently.
You don’t need to fill in a tax return if your only foreign income is dividends under £300 in total and you don’t have anything else to report.

I read this as:

1) If I earn a foreign income from US share dividends and its less than £300 and I don't file a self assesment for anything else then I don't need to file a self assessment.

2) If I earn a foreign income from US share dividends and its less than £300 and I do need to file a SA for another reason (say renting a second home for example), then I do need to include it in my self assessment

So am I reading it correctly that the person that does need to file a self assessment will pay tax on these earnings where as the person that doesn't will not?

uknick

But, if you have dividend income less than £5,000 you wouldn't pay tax on it anyway.

TheCyclingProgrammer

The requirement to fill out a self assessment and your liability to tax are two separate things.

The HMRC website guidance on who should fill out a tax return is just guidance. The actual legislation is a lot simpler. It simply states that anyone who receives a notice to file a tax return must file one. Additionally, it requires anyone who knows that they are chargeable to tax notifies HMRC by a specific deadline (6 October following the end of the tax year). The latter usually results in the former, but not always.

All the HMRC guidance does is try and outline common scenarios in which you would probably have to file a self assessment but really the criteria for notifying HMRC is whether you are chargeable to tax, nothing else. This is why, despite the HMRC website saying otherwise, company directors have no legal obligation to register for self-assessment if they don't have any taxable income that hasn't already had tax deducted at source (e.g. via PAYE) or is below the personal tax allowance.

You can fulfil the criteria to notify HMRC of any untaxed income by simply phoning them and telling them about it. If the income falls within a tax free allowance then there is no tax due and they won't ask you for a tax return. Even where tax is owed, there are circumstances in which HMRC can collect the tax through your tax code rather than requesting a tax return.

agrinnall

uknick wrote: »

But, if you have dividend income less than £5,000 you wouldn't pay tax on it anyway.

True from April 2016, but if the OP is looking at whether they need to do a return for 2015/16 then there may be tax to pay, depending on whether the IRS taxes dividends before they are paid and on whether that tax would be enough to offset any UK tax due.

Certainly from the text quoted it sounds like HMRC won't bother if the dividends are under £300 and there's nothing else to go on the return, perhaps because it would not be cost effective for the up to £30 tax that would be collected.

wookie6

Certainly from the text quoted it sounds like HMRC won't bother if the dividends are under £300 and there's nothing else to go on the return, perhaps because it would not be cost effective for the up to £30 tax that would be collected.

Yup, thats specifically what I'm asking, if they don't care about people not declaring foreign income under £300 if they don't need to file a SA for anything else, presumably if I file an SA for something else I don't need to declare any foreign income under £300 in the SA either?

Otherwise I would be taxed on my foreign income yet the person not doing an SA would not.

TheCyclingProgrammer

It does read like HMRC have some kind of de minimise rule that they aren't bothered about low levels of foreign dividend income but if you're doing a tax return you are supposed to report all taxable income on it.