Tax Glossary

Foreign Tax Credit Relief (FTCR)

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Last updated on:
March 17, 2024

Foreign Tax Credit Relief (FTCR) allows UK residents to offset the tax paid abroad against their UK tax liability on the same income, preventing double taxation. This relief applies to UK tax residents with foreign income or gains that are also taxed in another country. The amount of FTCR you can claim depends on the taxes paid overseas and the specific tax treaty between the UK and the foreign country, if one exists.

Here's how to claim and what to consider:

  • Claiming FTCR: You must declare your foreign income on your UK Self Assessment tax return, even if tax was already paid abroad. Within your tax return, you can claim FTCR, which effectively reduces your UK tax bill by the amount of foreign tax paid. The relief is claimed in the foreign section of the Self Assessment tax return.
  • Requirements for Claiming: To be eligible, you need to be a UK tax resident or a non-resident who has remitted foreign income to the UK. It's essential to keep records and evidence of the foreign tax paid.
  • Impact of Double Taxation Agreements (DTAs): The UK has DTAs with many countries to prevent double taxation and decide how income is taxed between the two countries. These agreements can affect how much relief you're entitled to claim. If there is a DTA, the relief may be limited to the lower of the foreign tax paid or the UK tax chargeable on the same income.
  • Limitations: The relief claimed cannot exceed the amount of UK tax due on the same income. If the foreign tax paid is higher than the UK tax on that income, the excess cannot be refunded or used to offset against other UK tax liabilities.
  • No Tax Return Needed Under Certain Conditions: If your only foreign income is dividends and they fall below the £1,000 dividend allowance, and you have no other income to report, you may not need to file a tax return.

When claiming FTCR, it's vital to understand the terms of any relevant DTAs and accurately report your foreign income and taxes paid. Consulting with a tax professional can ensure that you maximize your relief while remaining compliant with UK tax laws.

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