United Kingdom

Foreign tax relief

Please note that, in the Autumn 2024 Budget, the government announced plans to abolish the current tax regime for non-UK domiciled individuals. The following sections set out the rules as currently in place in the United Kingdom, but it must be noted that these will not remain in force beyond the current 2024/25 tax year. For more information on the expected changes, please see the Significant developments section.

UK residents are usually able to claim a credit for foreign taxes suffered on overseas income or gains that are taxable in the United Kingdom. This is either under an applicable tax treaty or UK unilateral relief. In some circumstances, the taxpayer can elect for the foreign tax to be deducted from the taxable amount in the United Kingdom as an alternative to having a credit for the foreign tax suffered.

The remittance basis charge (RBC) is in addition to the tax liability arising on the income and gains remitted to the United Kingdom. As the GBP 30,000/60,000 is a tax (on either income or capital depending on the funds nominated), it should be accepted as income tax or CGT by other jurisdictions for the purposes of tax treaties. In respect of United States (US) citizens, the US Internal Revenue Service (IRS) has confirmed that the RBC is a creditable foreign tax.

Nominating income or gains in relation to the GBP 30,000/60,000 RBC is a complex specialist area, and further advice should be sought where necessary. As mentioned at the beginning of this section, the UK government has announced plans to abolish the current tax regime for non-UK domiciled individuals. The above section sets out the rules as currently in place in the United Kingdom, but it must be noted that these are unlikely to remain in force beyond the current 2024/25 tax year. For more information on the expected changes, please see the Significant developments section.

Tax treaties

The United Kingdom has one of the largest networks of tax treaties, with more than 100 countries. These conventions aim to eliminate double taxation of income or gains arising in one territory and paid to residents of another territory. They work by dividing the tax rights each country claims by its domestic laws over the same income and gains. Most treaties are based on the Organisation for Economic Co-operation and Development (OECD) Model Taxation Convention.

The OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) (the 'Multilateral Instrument' or 'MLI') entered into force in the United Kingdom on 1 October 2018 and will have a fundamental impact on how taxpayers access double tax treaties (DTTs) to which it applies. It began to apply (e.g. in relation to WHT) from 1 January 2019 to the UK’s DTTs with those territories that have also ratified before 1 October 2018, where those are covered tax agreements. The precise dates on which the MLI will begin to have effect for other purposes, or in relation to other DTTs, will depend upon when other treaty partners submit their instruments of ratification with the OECD and what options and reservations they have submitted.

Tax information exchange agreements (TIEAs)

TIEAs have been entered into to promote international co-operation in tax matters through exchange of information.

The United Kingdom has entered into reciprocal agreements relating to the European Union (EU) Directive on taxation of savings income in the form of interest payments with a number of countries. The United Kingdom has also entered into a number of non-reciprocal agreements relating to the EU Directive on taxation of savings income in the form of interest payments.

The United Kingdom has made a number of bilateral agreements for cooperation in tax matters through exchange of information.

Social security agreements

The United Kingdom has treaties with many countries with regard to social security. Individuals coming from countries with which the United Kingdom does not have a reciprocal arrangement may alternatively qualify for a 52-week exemption from UK social security if assigned to the United Kingdom by an overseas employer.