Exemptions and reliefs from UK withholding tax on yearly interest

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Exemptions and reliefs from UK withholding tax on yearly interest
  • Exemption for short interest
  • Exemption for interest paid on regulatory capital securities
  • Meaning of regulatory capital security
  • Exemption for interest paid by banks in the ordinary course of their business
  • Bank
  • In the ordinary course of a bank's business
  • Exemption for interest on an advance from a bank
  • Exemption for interest paid to a building society
  • UK to UK exemption—exemption for interest paid to UK resident companies, UK permanent establishments and other specified entities
  • More...

Exemptions and reliefs from UK withholding tax on yearly interest

Unless an exemption or relief applies, payments of:

  1. yearly interest (or amounts that are treated by tax legislation as payments of yearly interest), and

  2. which have a UK source

are subject to UK withholding tax at the basic rate (currently, 20%) (for more detail, see Practice Note: UK withholding tax on yearly interest).

For an overview of UK withholding tax on yearly interest, see: UK withholding tax—overview.

The key UK withholding tax exemptions detailed in this Practice Note include the exemptions for:

  1. short interest

  2. interest paid on regulatory capital securities

  3. interest paid by banks in the ordinary course of their business

  4. interest on a bank loan

  5. interest paid to a building society

  6. interest qualifying for the UK to UK exemption

  7. interest on a quoted eurobond

  8. interest on a qualifying private placement

  9. interest paid on peer-to-peer (P2P) lending

  10. interest distributions from certain funds

  11. interest paid by a dealer in financial instruments

  12. payments made under derivative contracts

  13. interest payable by recognised clearing houses or recognised investment exchanges

  14. interest paid to an associated EU company before 1 June 2021 (or, in certain circumstances, before 3 March 2021), and

  15. interest under a double tax treaty

References in this Practice Note to gross payments are to payments from which tax has not been, and is not required to be, deducted.

Whether or not a payment

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