Foreign interest

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Foreign interest
  • The tax status of the individual
  • The source of the interest
  • Foreign currency
  • Foreign tax deducted
  • EU Savings Directive (up to 31 December 2015)
  • Special withholding tax
  • How to opt out of SWT
  • Agreement with Switzerland (up to 31 December 2016)
  • Common reporting standard
  • More...

Foreign interest

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant tax changes associated with Brexit began to take effect. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit ― personal and employment tax implications guidance note.

This guidance note explains how foreign interest is taxed in the UK and how it should be reported to HMRC. It covers the treatment of bank interest, interest on loans to persons overseas, and interest on most overseas loan stock (ie interest on bonds issued by foreign governments or by companies abroad).

Some payments from offshore funds are also treated as interest and these are discussed in the Offshore funds guidance note.

For insurance products, see the Offshore bonds and other foreign policies guidance note. This note does not cover the rate of tax which is applied to the interest if it is taxable in the UK. This is covered in the Taxation of savings income guidance note.

The UK territories of the Isle of Man, Jersey and Guernsey are classed as overseas for tax purposes.

The tax status of the individual

The UK tax position of overseas interest depends on the tax status of the individual.

Taxpayers who are resident and domiciled in the UK are taxable on their worldwide income on the arising basis. In the case of interest, this means that it is taxable when it is credited to the foreign bank account. These terms are discussed in detail in the Residence ― overview and Domicile guidance notes.

Those individuals who are non-domiciled may instead use the remittance basis of assessment. This means that the interest is only taxed when it is remitted (brought) to the UK. If these individuals choose not to use the remittance basis, they are taxed

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