Tax on foreign dividends

I am preparing my personal tax return and I have a small amount of dividend income I have received from an overseas company (about £200) – can you explain how I should enter this on my tax return?

foreign dividends

In normal circumstances foreign income is shown on foreign supplementary pages on a UK tax return.

However HMRC offer an exemption to this rule, allowing disclosure on the standard pages where your only foreign income is dividends of up to £300 or interest up to £2,000.

This does have a simplifying effect as you do not need the extra supplementary pages.

In the case of £200 of foreign dividends you therefore have the option of entering these in box 5 of the standard return and receiving the basic UK tax credit or using the supplementary foreign pages and also claiming the foreign tax credit.

We will look at an example below where we assume these dividends are from a French company with a 15% tax credit and you are a UK resident for tax and a higher rate tax payer in the 2015-16 tax year.

tax on foreign dividends

As you can see by using the foreign income pages and claiming the foreign tax credit there is a tax saving when compared to using the simplified procedure as it allows for further tax credits to be claimed at the higher rate of tax.

For basic rate tax payers there is no difference between the tax paid under either scenario and as such the simplified route is preferred.