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Foreign dividends – tax rates and tax credits

Lynnette Bober explains the tax rules for remitted foreign dividend income and how best to fill in the self assessment return for your non-domiciled clients. This includes information on the dividend tax credit and tax practitioners should review their clients.

Foreign dividend income sheltered by the remittance basis cannot benefit from the lower dividend tax rates when remitted. This means that the standard tax rates (currently 20%/40%/45%) apply to remitted remittance basis dividends where an exemption or relief is not available.

An individual can only benefit from the dividend nil rate (£2,000 in the current year following a decrease from the higher £5,000 amount for 2017/18) where dividends would otherwise be subject to tax at one or more of the dividend tax rates. As such, remittance basis dividends remitted also cannot benefit from the dividend nil rate.