UK dividend tax to pay on US shares (ongoing and historic)

tonywick

tonywick said:

temega463 said:

Thanks all for the additional points. Today I called HMRC and got through to a "technical specialist" who was most helpful. She confirmed approach as above and relief is 15%. Anyway I've sent through the details and workings to HMRC and made a preliminary credit by their advice. Very friendly and understanding on the phone - hope things remain that way after their computations!

Thanks for posting the advice in this thread. I was in a similar position with some US shares that I'd mostly left alone, and dividends were used to buy extra shares. I got interested again when they rose considerably in value and thought I'd better sort out the HMRC position. I'm only a basic rate taxpayer, and any time I've sold a batch the gain was within the relevant CGT threshold for that year. However, the guidance on foreign shares on Gov.uk indicates that you should report any income from such shares regardless, so I though I'd be in for a severe telling off.

But when I (eventually) got through to a real person in HMRC it was confirmed that as a basic rate taxpayer the 15% I pay in the US on dividends does indeed nullify any need for additional UK taxation. And that they trusted my word that I hadn't exceeded CGT thresholds! (I'd prefer to have that in writing, but I assume they recorded that call) I was also told that, if I were submitting a self-assessment for any other reasons, then I would be expected to include foreign income (at any level), but that as long as I stay at basic rate, and don't exceed the CGT threshold I don't need to submit a self-assessment each year just for my current share income.  

Also, it seems that if I do sell enough at any time to get hit with CGT, there is a "fastpath" mechanism of reporting this on Gov.uk, without doing a full self-assessment if I've nothing else to report.

Having reported on my discussions with HMRC regarding dividend tax and CGT on US shares, I've been made aware by sombody of another aspect I hadn't considered (very naively) and that is income tax liability after the other two types of tax are "sorted". Does anyone have any experience of how this is calculated in this situation? I'm rather surprised it wasn't mentioned during my HMRC phone call. I know that pleading ignorance doesn't generally find much favour!  

eskbanker

tonywick said:

Having reported on my discussions with HMRC regarding dividend tax and CGT on US shares, I've been made aware by sombody of another aspect I hadn't considered (very naively) and that is income tax liability after the other two types of tax are "sorted". Does anyone have any experience of how this is calculated in this situation? I'm rather surprised it wasn't mentioned during my HMRC phone call. I know that pleading ignorance doesn't generally find much favour!  

Maybe some wires getting crossed here but 'dividend tax' is income tax?

DRS1

Or perhaps someone is saying that you need to include the US dividends in your total income to see if you are still a basic rate taxpayer?

poseidon1

DRS1 said:

Or perhaps someone is saying that you need to include the US dividends in your total income to see if you are still a basic rate taxpayer?

Yes, that was the point I was making  in my December 2025 post.

phlebas192

Yes, dividends need to be included in total income but they are considered after earnings / pensions and interest. So £49k earnings, £1k interest and £500 dividends would result in £500 of the interest being taxed (total income  > £50,270 so personal savings allowance is only £500). nb: this £500 would be taxed at 20% (*) because although you would now be a higher rate tax payer the earnings and interest do not exceed the basic rate tax band. 

On the other hand, £12,570 earnings, £6k interest and £500 dividends would attract no income tax - you would qualify for the full £5k Starting Rate for Savings since it is calculated before factoring in dividends.

No one ever said that the tax rules were entirely consistent!

nb: this can all be checked at https://www.tax.service.gov.uk/guidance/work-out-tax-on-your-savings-or-dividend-income/start/tax-year

* - 2025-26 tax rates, will rise to 22% next year

DRS1

phlebas192 said:

Yes, dividends need to be included in total income but they are considered after earnings / pensions and interest. So £49k earnings, £1k interest and £500 dividends would result in £500 of the interest being taxed (total income  > £50,270 so personal savings allowance is only £500). nb: this £500 would be taxed at 20% (*) because although you would now be a higher rate tax payer the earnings and interest do not exceed the basic rate tax band. 

On the other hand, £12,570 earnings, £6k interest and £500 dividends would attract no income tax - you would qualify for the full £5k Starting Rate for Savings since it is calculated before factoring in dividends.

No one ever said that the tax rules were entirely consistent!

nb: this can all be checked at https://www.tax.service.gov.uk/guidance/work-out-tax-on-your-savings-or-dividend-income/start/tax-year

* - 2025-26 tax rates, will rise to 22% next year

OK But let's imagine that in your example (the £49k one) there is £1000 of dividends (from the US) on which you have paid £150 of withholding tax (ie net £850).

In that case you have £500 dividend allowance at 0% but the next £500 is taxed at 33.75% giving tax of £168.75.  I am assuming you can offset the £150 against that and be left with with UK tax of £18.75.

What you can't do is say I only earn £49k so I am a basic rate taxpayer and as such the dividend tax rate is 8.75% and will ALL be covered by the 15% withholding tax. 

I am not saying anyone IS saying that just that it may be what someone meant by saying to @tonywick that there may be some income tax liability after sorting out the dividend tax and CGT position.  Of course @eskbanker may be right and some wires may just have got crossed.