Foreign Tax Credit Relief

itwasntme001

Hello,

I am completing my self assessment for 2021/22 tax year and have a query about the foreign tax credit relief option.  This is the first time that this may be applicable to me.

My dividends just from UK shares are above the £2k allowance and I am a basic rate taxpayer (so anything above £2k gets taxed at 7.5%).  I also have dividends from US shares which are taxed at 15% before I receive the dividends (have done the WBEN form etc).

I understand I can apply for foreign tax credit relief since I am potentially paying both the 15% US tax and the 7.5% UK tax on the US shares dividend.  So is the amount I can get as relief simply 7.5% x [total US shares GROSS dividend]?

Is this the most I can reduce my tax liability or can I choose another option instead of this tax relief?

When completing the foreign pages section of the SA, it asks me to put in the "Maximum foreign tax credit relief" from the drop down menu.  For the US is this simply 15%?

Thanks

wmb194

itwasntme001 said:

Hello,

I am completing my self assessment for 2021/22 tax year and have a query about the foreign tax credit relief option.  This is the first time that this may be applicable to me.

My dividends just from UK shares are above the £2k allowance and I am a basic rate taxpayer (so anything above £2k gets taxed at 7.5%).  I also have dividends from US shares which are taxed at 15% before I receive the dividends (have done the WBEN form etc).

I understand I can apply for foreign tax credit relief since I am potentially paying both the 15% US tax and the 7.5% UK tax on the US shares dividend.  So is the amount I can get as relief simply 7.5% x [total US shares GROSS dividend]?

Is this the most I can reduce my tax liability or can I choose another option instead of this tax relief?

When completing the foreign pages section of the SA, it asks me to put in the "Maximum foreign tax credit relief" from the drop down menu.  For the US is this simply 15%?

Thanks

Yes, choose 15%. See the "Dividends" section of the tax treaty with the US.

https://www.gov.uk/government/publications/usa-tax-treaties

Negating the UK tax on dividends sounds correct. The SA help page has some examples.

https://www.gov.uk/government/publications/calculating-foreign-tax-credit-relief-on-income-hs263-self-assessment-helpsheet/relief-for-foreign-tax-paid-2022-hs263