Dividend tax on Degiro

nomoneynohoney

Hi All,
I am UK resident and I bought some US shares using Degiro platform.

When dividends come will they withhold 15% dividend tax   (keeping in mind i filled W-8 form to get -15% reduction from standard 30%)?
As everyone has a £2,000 dividend allowance what is way to get this 15% back ?

eskbanker

Foreign Tax Credit Relief is explained at https://www.gov.uk/tax-foreign-income

nomoneynohoney

Hi,
thanks for the link, i read this carefully- 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.
You do not need to fill in a tax return if all the following apply:

• ...
• your total dividends - including UK dividends - are less than the £2,000 dividend allowance
• ...

So i dont need to pay any tax if it is less than £2,000.
The problem is Degiro already withholds 15% dividend tax.
1)  Is it any way to get this money back? If not - does it mean there is no way to invest in foreign shares and use this £2,000 allowance?
2) Does DEGIRO withold 15% dividend tax on UK shares? If yes - what is the way to use this £2,000 allowance?

Thanks in advance!

eskbanker

nomoneynohoney said:

1)  Is it any way to get this money back? If not - does it mean there is no way to invest in foreign shares and use this £2,000 allowance?

As I understand it, no. https://www.gov.uk/tax-foreign-income/taxed-twice#if-youve-already-paid-tax-on-your-foreign-income states that you won't be able to reclaim tax already paid abroad if "the income would have been taxed at a lower rate in the UK", which would be the case if it would have fallen within the £2K 0% band.

nomoneynohoney said:

2) Does DEGIRO withold 15% dividend tax on UK shares?

They certainly shouldn't!

Thrugelmir

nomoneynohoney said:

As everyone has a £2,000 dividend allowance what is way to get this 15% back ?

Unfortunately not. Something that needs to be considered when buying individual international shares. European countries also levy varying levels of tax on dividend distributions. Has an impact on the potential returns. 

underground99

nomoneynohoney said:

So i dont need to pay any tax if it is less than £2,000.
The problem is Degiro already withholds 15% dividend tax.
1)  Is it any way to get this money back? 

You don't need to pay any UK tax on your dividends if you have less than £2000 of dividends.  But as you've noticed, the US is entitled to tax foreigners on dividends paid by US companies. As you filled out the form to say you were a UK resident, the US companies or intermediaries paying the dividends for credit to your account will honour the agreement to only charge you 15%, the maximum amount allowed under the UK-US tax treaty, rather than the 30% that they charge to people resident in some other countries.

To avoid you getting too heavily screwed over for taxes, the UK taxman accepts that if you have paid foreign taxes you can knock it off whatever UK tax bill you have on the same income. However, you're in the fortunate position of having no UK tax bill on the same income, because HMRC was only going to charge you 0% on the income.  If they knocked 15% off the UK tax bill of £0, the tax bill would not go down as they don't want to produce a UK tax bill of a negative amount. 

If not - does it mean there is no way to invest in foreign shares and use this £2,000 allowance?

You are 'using this allowance' ; the allowance means you are not getting a UK tax bill on your dividend income.  As there is no UK tax bill, there's no mechanism for HMRC to reduce your tax bill below zero. You owed some tax to foreign countries, which you already paid, but the UK tax authority isn't going to give you money to help you with the cost of that. All they would do is reduce their own tax bill to help you out, but as they weren't even giving you a tax bill on that income, there's nothing to reduce.

2) Does DEGIRO withold 15% dividend tax on UK shares? If yes - what is the way to use this £2,000 allowance?

No, they don't withhold tax on UK dividend income. If you get UK dividend income you would be responsible for paying any UK taxes on it yourself.

If your total dividends (UK and foreign) are below £2000, they will all be covered by the 0% rate meaning nothing to pay to HMRC on that income. So, you would be 'using' (some of) the £2000 allowance, because it's saving you a tax bill. You wouldn't be using all the UK allowance unless you generate dividend income of £2000 gross.

nomoneynohoney

Thank you all guys, i think now I inderstand it a lot better.