If you’re a UK resident, your worldwide income — including money earned outside the UK — is generally subject to UK tax. Whether it’s Dividends from an overseas company, interest from a foreign bank, or Profits from international trading, understanding the Tax rules is essential.
Prefer to watch? Here’s a breakdown of how UK residents are taxed on income earned abroad — including rental, dividends, and work income.
Here’s a clear guide to how different types of foreign income are taxed and how you can avoid paying tax twice through double tax relief.
What Counts as Foreign Income?
Foreign income includes:
- Overseas employment income
- Dividends from non-UK companies
- Interest from foreign banks
- Rental income from properties outside the UK
- Profits from trading activities carried out abroad
- Capital gains on the sale of foreign assets
If you earn any of these, you must usually report them to HMRC.
How Different Types of Foreign Income Are Taxed
| Type of Income | How It’s Taxed in the UK |
| Employment Income | Taxed as general income at UK rates. |
| Dividends | Taxed at UK dividend tax rates. Dividend allowance applies. |
| Interest | Treated as savings income. Savings allowance may apply. |
| Rental Income | Taxed as property income after allowable expenses. |
| Self-Employment/Trading Income | Treated as UK trading income with deductible business expenses. |
| Capital Gains | Subject to Capital Gains Tax at applicable rates. Annual exemption applies. |
Note: UK tax-free allowances such as the Personal Allowance (£12,570) and the Dividend Allowance (£500 from April 2025) can apply to foreign income too.
Residence and Domicile Considerations
If you are:
- UK Resident and UK Domiciled: You are taxed on all worldwide income.
- UK Resident but Non-Domiciled: You can opt for the remittance basis, meaning only income brought into the UK is taxed, but this might cost you the Remittance Basis Charge after some years of residence.
Double Tax Relief: Avoid Being Taxed Twice
If your foreign income has already been taxed abroad, you can claim relief:
- Foreign Tax Credit Relief (FTCR): Offset foreign tax against UK tax.
- Double Taxation Agreements (DTAs): Treaties may reduce or eliminate tax paid abroad.
Always check the specific treaty between the UK and the country where you earned the income.
You can’t claim more relief than the UK tax payable on that income.
How to Report Foreign Income
- File a Self-Assessment Tax Return and complete the Foreign Income (SA106) section.
- Keep records of foreign income received and foreign taxes paid.
✅ Final Thoughts
Foreign income taxation can seem complicated, but it’s manageable with the right advice. Declare your income correctly, claim available reliefs, and don’t pay more tax than you need to.
If you have foreign income and you’re unsure how to handle your tax return, speak to a qualified adviser.
Many people assume HMRC won’t find out about overseas income — but that’s risky. Here’s why making assumptions with HMRC can cost You. https://gracecertifiedaccountants.co.uk/why-you-shouldnt-make-assumptions-with-hmrc/