Withholding tax

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FORTHCOMING CHANGE: The government is exploring options to potentially simplify the process and administration of double tax treaty (DTT) relief from UK withholding tax on payments of UK source yearly interest to non-UK lenders. For more information on the consultation published on 13 July 2026, see News Analysis: Legislation Day: Draft Finance Bill 2027—Tax analysis—Finance.

Tax collected from the payer

Certain UK source payments normally require the payer to deduct (and account to HMRC for) an amount in respect of UK income tax (and, in the case of employment income, employee National Insurance contributions as well as income tax) unless a relief or an exemption applies.

This Overview refers to the obligation to deduct (and account to HMRC for) an amount in respect of UK income tax from such payments as a withholding tax even though it is actually a method of collecting tax at source from the person who makes a payment instead of raising an assessment on the recipient.

Withholding tax is an effective way for tax authorities, such as HMRC to collect tax. It passes the administrative burden onto the person making

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