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Foreign Investment Income

UK residents are taxed on their worldwide income and capital gains. If you hold investments outside the UK — foreign shares, overseas property, foreign bank accounts, or offshore funds — you must report the income and gains to HMRC. The tax treatment is broadly the same as for UK investments, but with additional complexity around foreign tax credits, double taxation relief, exchange rates, and (for non-domiciled individuals) the remittance basis. Reporting is done on the Foreign pages (SA106) of your Self Assessment tax return. The tax year runs from 6 April to 5 April, and income should be converted to GBP using HMRC's published exchange rates.

Reporting Foreign Dividends

Foreign dividends are taxed under the same rules as UK dividends — the first £500 of total dividend income (including foreign dividends) is tax-free under the dividend allowance, and amounts above are taxed at 8.75%, 33.75%, or 39.35% depending on your tax band. However, many countries impose withholding tax on dividends paid to non-residents. The US, for example, withholds 15% on dividends paid to UK residents under the US-UK Double Taxation Treaty (otherwise 30%). You report the gross dividend (before withholding tax) on your Self Assessment return, and the foreign tax withheld is shown separately. You can then claim Foreign Tax Credit Relief to avoid being taxed twice on the same income. The credit is usually the lower of the foreign withholding tax and the UK tax on that income. You need to know the exact exchange rate on the date the dividend was paid (or HMRC's average rate for the period).

Reporting Foreign Interest

Interest from foreign bank accounts, foreign bonds, and foreign savings products is taxed as savings income under UK rules. The Personal Savings Allowance (£1,000 / £500 / £0 depending on your tax band) and Starting Rate for Savings apply to worldwide savings income. Foreign interest is usually paid gross (no withholding) or with a small withholding tax depending on the country. You report the gross interest received and claim Foreign Tax Credit Relief for any withholding tax suffered. Accrued interest on foreign bonds may be subject to the accrued income scheme rules. Some countries (notably EU member states) automatically share information with HMRC under the Common Reporting Standard (CRS), so HMRC will know about your foreign accounts. You must also report foreign accounts on the SA106 foreign pages.

Foreign Capital Gains

Capital gains on disposals of foreign assets (e.g. selling shares in a US company, disposing of an overseas property) are subject to CGT in the UK. The annual exempt amount (£3,000 for 2025/26) and rates (10%/20%) apply in the same way as for UK assets. Some countries also tax gains on assets situated in their jurisdiction — for example, many countries tax gains on the disposal of real estate located in that country. Where both the UK and the foreign country seek to tax the same gain, the Double Taxation Treaty normally allocates taxing rights. In most treaties, gains on shares are taxable only in the country of residence (the UK), while gains on real estate are taxable in the country where the property is situated (the source country). If both countries tax the gain, you can claim Double Taxation Relief via Foreign Tax Credit Relief.

Double Taxation Relief

Double Taxation Relief (DTR) prevents the same income or gain from being taxed in both the UK and the source country. There are two main mechanisms: the Double Taxation Treaty between the UK and the source country, which allocates taxing rights and often limits withholding tax rates; and Unilateral Relief (Foreign Tax Credit Relief), which gives a credit against UK tax for foreign tax paid on the same income. The credit is limited to the lower of: the foreign tax paid, and the UK tax due on that income. If the foreign tax exceeds the UK tax (e.g. because your UK marginal rate is lower), the excess cannot be refunded or carried forward. DTR is claimed on your Self Assessment return — you enter the foreign income gross and the foreign tax paid, and the UK tax is computed with the credit applied automatically in most cases. Each country's treaty is different — the US-UK treaty, for example, allows UK pension contributions to be deducted from US-sourced income in certain circumstances.

Remittance Basis

Non-domiciled individuals (those whose permanent home is outside the UK) can elect to use the remittance basis of taxation. Under the remittance basis, foreign income and gains are only taxed in the UK if they are brought into (remitted to) the UK. If the foreign income remains outside the UK, it is not taxed. However, the remittance basis comes at a cost: if you have been UK-resident for 7 of the last 9 tax years, you must pay the Remittance Basis Charge (£30,000 if resident 7 of 9 years, £60,000 if resident 12 of 14 years). From April 2025 onwards, the remittance basis is being phased out and replaced by a residence-based system (the FIG regime), under which new arrivals to the UK are exempt from tax on foreign income and gains for the first 4 years of residence, regardless of whether the income is remitted. The rules are complex and professional advice is essential.

Exchange Rates

Foreign investment income and gains must be reported in GBP. HMRC publishes monthly and annual average exchange rates and spot rates. You can use: the spot rate on the date of the transaction, HMRC's published rates for the month or year, or an average rate for the period (if consistent). For dividends, the relevant date is the payment date (when the dividend is received). For capital gains, the relevant dates are the acquisition and disposal dates. If you use a consistent and reasonable method, HMRC will generally accept it. Many tax calculators and Self Assessment software handle exchange rate conversion automatically if you enter the foreign currency amounts. Exchange rate fluctuations on the principal amount of a foreign currency loan or deposit are generally treated as capital gains/losses, not income — though the distinction can be complex for currency traders.

Reporting on SA106

The SA106 foreign pages are used to report foreign income and gains. There are separate sections for: foreign dividends, foreign interest, foreign property income (rent), foreign pension income, foreign employment income, and foreign capital gains. You need to show both the gross foreign amount and the foreign tax paid. The SA106 also captures information about foreign accounts under the CRS/FATCA reporting obligations. If your foreign income is small (total foreign dividends and interest under £300), you may not need to complete the full SA106, but you must still include the income on your main tax return. Filing online through HMRC's digital Self Assessment service is the easiest way — the system handles Foreign Tax Credit Relief calculations automatically once you enter the gross income and foreign tax paid. Penalties for failing to report foreign income can be substantial, including up to 200% of the tax due in serious cases.