how does double taxation agreements work?

[Deleted User]

Jeremy535897 said:

The £1,354 was the overseas tax paid of £1,800 less the UK tax that would otherwise have been paid of £486. If you have UK income say of £13,000 and overseas income of £15,000 on which you have paid £1,800 overseas tax, you are allowed to set your personal allowance against the UK income on which you would otherwise have paid 20% income tax, leaving the overseas income within the charge to income tax, but at 20% less the overseas tax paid.

Yes. Sorry - it is £1314. The only reason that I highlight ‘THAT source of income’ is due to the fact that many believe that, so long as £1800 tax is paid, all of the foreign tax is relievable. The example that you use is fine. However, if one’s U.K. liability was, for example, £250 income tax and £2000 capital gains tax, foreign tax relief can only be claimed up to £250. 

It is more common with foreign capital gains tax, One could pay £20000 U.K. income tax and have a U.K. CGT liability on foreign gains of £1000. The foreign capital gains tax paid may well exceed £1000 but that is the maximum amount that could be claimed as tax credit relief. 

(I am aware that you know this) 

Quite some years ago I had a client who sold a property in Ireland and was most unhappy that he could not claim full TCR against his U.K. CGT liability.