Taxation on overseas interest income

[coolguycp1]

Apologies if I have not posted it to the right forum but I have a query which some of distinguished accountants/experts on this forum may have an answer to.

For a UK resident with interest received on foreign term deposits in a country which has a Double Taxation treaty with UK, is there any UK tax that will apply on the interest income? If so, will it be the same as the marginal tax rate (basic/higher rate etc.) of the individual concerned, i.e., the same rate as interest in UK bank accounts are taxed?

[Clare@InTouch]

In general - UK tax will apply on the income, but any foreign tax will be offset against it. If the foreign tax was lower, a UK liability will result. If the foreign tax was higher, there's no further liability on that income in the UK.

The effect of the double tax treaty is to ensure you pay the higher tax in either country.

The rates of UK tax that apply will be the same as your normal UK tax would have been on that type of income (in most cases, although foreign income is by no means an easy answer-able subject).

[ASB]

As Clare stated the general principle is that you will pay the higher of the tax in the foreign country or the UK (i.e. generally relief can be obtained to the extent of the foreign tax suffered but no more).

It depends on the DTA (if any) between the UK and the other nation.

Even with no treaty there is the poossibility of unilateral relief in some circumstances.

Some reading. HM Revenue & Customs: Tax on foreign savings and investment income

The devil is always in the detail of the specific DTA involved.

Of course if you are also resident in the other country (it is quite possible to be tax resident in multiple jurisdictions simultaneously) then it will become a bit more complex.