Tax on Dividends for Expats

dean350

I have shares held in a UK based non-ISA brokerage account. I have lived overseas for 12 years and have been non-resident for income tax purposes all of that time. However this account now delivers about 13K in dividends every year. Is this classed as UK sourced income and how would it be treated for tax?

bowlhead99

The fact that the broker is in the UK does not make it UK income. It depends on what you have invested in. For example a dividend from Tesco is UK investment income and a dividend from Microsoft is not. A dividend from a UK 'fund' (unit trust or OEIC) is UK investment income but a dividend from an Irish equivalent is not.

You don't mention of you have any other UK income. If you're non UK resident your UK dividend income (and certain other types of excludable or disregardable investment income such as UK bank interest) can be effectively excluded from UK tax you give up your personal allowance(s). So you would run a UK income tax calculation on all your UK income twice, once with all the standard allowances to which you're entitled and once without the allowances but ignoring the dividend and interest income, and you get to take the more favourable outcome.

See guidance HS300
https://www.gov.uk/government/publications/non-residents-and-investment-income-hs300-self-assessment-helpsheet/hs300-non-residents-and-investment-income-2019

However, that only covers UK tax and you asked how it would be treated 'for tax', so presumably that includes some consideration of the taxes levied in the country in which you are resident. That's obviously country-dependent, e.g. if you are in the USA they will want to tax you on your worldwide investment income, whereas if you are in Hong Kong they don't tax dividends at all.

dean350

Thanks very much - the HS300 document is most useful. I don't have any other UK income and to me its clearly 'disregarded income' for UK tax purposes. Where I am now does not tax overseas dividends.

I will come back to UK in a few years time and I have read that returning expats are often looked at closely by HMRC - hence my interest.