UK withholding tax on yearly interest
UK withholding tax on yearly interest

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

  • UK withholding tax on yearly interest
  • Yearly interest
  • UK source
  • Exemptions and reliefs

Unless an exemption or a relief applies, a payment of yearly interest is subject to UK withholding tax at the basic rate (currently, 20%) if made by:

  1. a company (unless it is made by that company in a fiduciary or representative capacity)

  2. a local authority

  3. by or on behalf of a partnership of which at least one partner is a company, or

  4. any person to another person whose usual place of abode is outside the UK (broadly, this applies where the recipient is an individual who usually lives outside the UK or a company whose main place of business is outside the UK)

For exemptions and reliefs from the obligation to deduct income tax from yearly interest, see Practice Note: Exemptions and reliefs from UK withholding tax on yearly interest.

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

This Practice Note explains the concepts of yearly interest and UK source, which underpin the rules requiring UK income tax to be withheld at the basic rate of 20% from a UK source payment of yearly interest.

This Practice Note deals only with the obligation to withhold UK tax on a payment of yearly interest and does not discuss the tax deduction scheme for interest (TDSI) rules, which have been abolished since 6 April 2016. Broadly, before 6 April 2016, the