Personal Tax

Foreign interest

Produced by Tolley
  • 22 Mar 2022 09:41

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
  • Remittance of income that suffered special withholding tax under EU Savings Directive
  • Remittance basis users ― withholding tax under the UK / Switzerland agreement
  • Unremittable income
  • Source ceasing
  • Completing the tax return
  • More...

Foreign interest

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 or deemed 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. The meaning of residence and domicile are discussed in detail in the Residence ― overview and Domicile guidance notes.

Individuals who are UK resident but not domiciled or deemed 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

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