Reclaiming foreign withholding tax on dividends

Many countries withhold tax from dividends at their full domestic rate, even where their treaty with the UK sets a lower maximum. The UK will only give credit for foreign tax up to the treaty rate, and never more than the UK tax on the dividend, so any excess has to be reclaimed from the foreign tax authority, usually with an HMRC certificate of residence. For 2026 to 2027 a basic rate taxpayer pays only 10.75% UK tax on dividends above the allowance, so even tax correctly withheld at a treaty rate may not be fully covered by credit.

Why is more tax withheld than the treaty allows?

A treaty’s dividend article lets the company’s home country tax dividends paid to a UK resident but caps the rate. The UK and US convention is a typical example: Article 10 limits US tax to 5% where the beneficial owner is a company with at least 10% of the voting power, and 15% in all other cases. Portfolio investors therefore face a 15% cap.

Whether the cap is applied when the dividend is paid depends on the foreign country’s procedures and on whether your broker or custodian has given the paying agent the documents that country requires. If it has not, tax is taken at the domestic rate and the treaty benefit has to be claimed back afterwards. HMRC’s certificate of residence guidance puts it simply: if you have already paid the tax you may be able to get a refund, and the overseas authority decides whether relief is granted. Our guide to how double tax treaties work explains the dividend article in more detail.

Why can’t the excess just be credited in the UK?

Because the law says the UK will not pay for tax the other country was not entitled to keep. The 2026 Foreign notes for the SA106 pages say that if a treaty limits the other country to a particular rate and you paid more, you must restrict your Foreign Tax Credit Relief claim to the treaty rate. If the treaty gives the other country no right to tax the income at all, you cannot claim credit and must claim relief in that country.

Section 33 of the Taxation (International and Other Provisions) Act 2010 underpins this. Credit cannot exceed what would have been allowed had all reasonable steps been taken, under the foreign law and the treaty, to minimise the foreign tax, including claiming reliefs and making elections. Not bothering to reclaim does not turn the excess into creditable tax.

HMRC’s helpsheet HS263 gives an example: Chris receives a £100 Spanish property income dividend with £20 tax withheld, but the treaty allows 15%. Only £15 can be credited, and the £5 excess may be recoverable from the Spanish tax authorities.

How do you reclaim the excess from the foreign authority?

1. Check the treaty rate for your type of holding, and any conditions such as beneficial ownership.
2. Get proof of UK residence. HMRC issues a certificate of residence if you are UK resident and a treaty exists with that country. It will not issue one if you are not entitled to the treaty benefits. You apply online, or an authorised agent can, stating the treaty, the country, the type of income and the period, which cannot be a future date. You may need to confirm that you are the beneficial owner and are subject to UK tax on the income. If the foreign authority has its own residence form, you upload it for HMRC to certify. If you have not yet filed a return for the period, HMRC also asks for your UK day count and the basis on which you are resident under the statutory residence test.
3. Submit the foreign claim with the certificate and the dividend vouchers or broker statements showing the gross dividend and tax withheld. Each country sets its own forms and deadlines, so check them early; some are short.
4. Record the outcome so that your UK return and any later refund are consistent.

Where there is no treaty, HMRC can instead issue a letter confirming residence, but without a treaty there is no treaty rate to reclaim down to. See certificates of residence for the application process.

How much UK credit relief is left after the treaty rate?

Credit is the lower of the foreign tax allowed by the treaty and the UK tax on that dividend, worked out item by item (HS263). The UK tax on a dividend depends on where it falls:

Where the dividend falls (2026 to 2027)	UK tax on dividend	Credit for 15% foreign tax
Within the £500 dividend allowance	Nil	Nil
Basic rate band	10.75%	Limited to 10.75%; the other 4.25% is lost
Higher rate band	35.75%	Full 15%
Additional rate band	39.35%	Full 15%

The SA106 notes confirm that if no UK tax is due because a dividend is within the allowance, no credit is available, but all dividends must still be entered because they affect the rate on others. They also list countries whose taxed dividends never qualify for credit, including Australia (franked dividends only), Cyprus, Guernsey, Jersey, the Isle of Man, Malta and Singapore. HS263 allows you to order your income and allowances in the way that gives the largest credit. Our foreign tax credit relief guide covers the calculation.

What does a full example look like?

Illustration only. Two investors each receive a £2,000 gross dividend from Country X, which withholds 30% (£600). The treaty rate is 15% (£300). Both have already used their dividend allowance.

	Higher rate taxpayer	Basic rate taxpayer
UK tax on £2,000	£715 (35.75%)	£215 (10.75%)
Foreign tax creditable (treaty £300, capped at UK tax)	£300	£215
UK tax still payable	£415	Nil
Excess to reclaim from Country X	£300	£300
Total tax if the reclaim succeeds	£715	£300

On the SA106 pages each investor enters £2,000 as the income, £300 as the foreign tax (the treaty amount, not the £600 withheld) and claims credit. The basic rate taxpayer still bears £85 more than a UK dividend would cost, because the treaty rate exceeds the UK rate. Without the reclaim, both lose a further £300.

What if a refund arrives after the return is filed?

If credit has already been allowed and the foreign tax is later adjusted so that the credit becomes excessive, section 80 of the 2010 Act requires you to notify HMRC within one year of the adjustment. The penalty for failing to do so can be up to the amount by which the credit has become excessive. Where you claimed only the treaty rate, a refund of the excess above it should not affect the credit, but a refund that takes the foreign tax below the treaty rate does.

In the other direction, the time limit for claiming credit under section 19 is the fourth anniversary of the end of the tax year or, if later, 31 January after the tax year in which the foreign tax is paid. That helps where a foreign authority settles a dispute years later. Changes to a filed return are covered in amending a tax return.

Are there cases where credit is not available at all?

• ISAs and pensions. Dividends inside an ISA bear no UK tax, so there is nothing to credit; see foreign withholding tax in an ISA.
• The FIG regime. A qualifying new resident who claims relief under the foreign income and gains regime on a dividend cannot also claim credit on it (SA106 notes).
• Countries with exclusive taxing rights. Where the treaty gives taxing rights only to the UK, HS263 says no foreign tax is payable, so any tax withheld must be reclaimed abroad in full.

What are the common mistakes?

• Entering the full foreign tax withheld on the return instead of the treaty amount.
• Assuming the UK will refund what the foreign country overcharged. It will not.
• Leaving reclaims until the foreign deadline has passed.
• Forgetting that basic rate taxpayers often cannot use all of even the treaty rate tax.
• Not telling HMRC within a year when a later foreign refund makes a credit excessive.

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Related Accountapedia entries

• Foreign withholding tax on dividends in an ISA
• Foreign entertainers and sportspeople: withholding tax
• UK withholding tax on interest and royalties
• Reclaiming VAT on employee expenses
• Foreign tax credit relief

Sources

• GOV.UK: 2001 uk usa double taxation convention as amended by the 2002 protocol
• GOV.UK: Get a certificate of residence
• GOV.UK: Self assessment foreign sa106
• legislation.gov.uk: Act 2010 c. 8, section 33
• GOV.UK: Relief for foreign tax paid 2026 hs263
• GOV.UK: Tax on dividends
• legislation.gov.uk: Act 2010 c. 8, section 80
• legislation.gov.uk: Act 2010 c. 8, section 19

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.