The UK has one of the largest networks of Double Taxation Agreements (DTAs) which can be used to provide UK Double Taxation Relief for expats. Double taxation relief is available for most income types including employment income, interest, dividends, rental income and pension. Key factors impacting the amount of UK double taxation relief you are entitled to include your domestic residence status, the location of your homes, and your Centre of Vital Interests.
The terms of each DTA vary and it is therefore essential that you consult the specific treaty in question to determine the amount of UK double taxation relief you are entitled to.
If you would like to discuss the UK Double Taxation Relief for expats and how this impacts you, please contact us at Expat Tax Solutions.
What Is UK Double Taxation Relief?
In short, UK double taxation relief is available for individuals who are subject to tax in two countries on the same income. This commonly arises where an individual is tax resident in one country and has income sourced to another country.
In this scenario, the ‘resident state’ has the right to tax the individual’s worldwide income and gains and the ‘source state’ has the right to tax income sourced to that country. As such, both countries have the right to tax the same income and double taxation arises.
Alternatively, an individual may be tax resident in two countries simultaneously in which case both countries may tax their worldwide income and gains resulting in double taxation.
UK double taxation relief can be claimed under an international Double Taxation Agreement (DTA) or if no DTA exists, UK double taxation relief may be claimed unilaterally.
The amount of UK double taxation relief that is available, how the relief should be claimed (credit vs exemption) and whether the relief should be claimed in the UK or in the other country are all essential to ensure an accurate and valid claim for UK double taxation relief is made.
How UK Double Taxation Agreements Work
Double Taxation Agreements (DTAs) are international agreements between two countries outlining how both jurisdictions should tax income in cases of double taxation. DTAs cannot impose a tax charge that does not exist domestically and therefore although a DTA may give a country the right to tax certain types of income, it may not be taxable under local laws and the domestic position should therefore be assessed.
Although many DTAs are written using a similar framework (The OECD Model), articles can vary from treaty to treaty and it is therefore essential that the specific treaty is reviewed.
One of the key principles within DTAs is the concept of ‘treaty residence’. This is used to allocate taxing rights when an individual is tax resident in both countries under their domestic laws (i.e. The Statutory Residence Test in the UK).
If an individual is domestically tax resident in only one country, they will automatically be ‘treaty resident’ in that country. If an individual is domestically non-resident in both countries, they cannot use the DTA.
For dual residents, their ‘treaty residence’ is typically determined using the following principles:
- If the individual has a permanent home in one country, they will be ‘treaty resident’ in that country.
- If the individual has permanent homes in both countries, they will be ‘treaty resident’ in the country with which their personal and economic relations are closer (Centre of Vital Interests).
- If the Centre of Vital Interests cannot be determined or the individual has no permanent home in either state, they are ‘treaty resident’ in the country in which they have a habitual abode.
- If the above cannot be determined, they will be ‘treaty resident’ in the country of which they are a national.
- If they are a national or both or neither country, their ‘treaty residence’ is determined by mutual agreement between the two countries.
Types Of UK Double Taxation Relief
Treaty Relief Via Exemption
The most efficient basis to claim UK double taxation relief is via exemption. This allows you to completely exempt the income from UK tax and achieve full UK double taxation relief.
This is only available if you are ‘treaty non-resident’ in the UK per the residence article of the DTA (usually Article 4) and the income is non-UK sourced. UK double taxation relief is not commonly available on UK sourced income as the UK always has primary taxing right over this and UK double taxation relief can therefore only typically be claimed on foreign income. There are some exceptions under some treaties for example UK bank interest can usually be exempted from UK tax for UK treaty non-residents.
In this scenario it is likely that the income will still need to be declared in the UK via a self-assessment tax return which includes a corresponding treaty relief claim.
Treaty Relief Via Foreign Tax Credit
UK treaty residents are usually able to claim UK double taxation relief via a foreign tax credit. In this scenario, the income is fully taxable in the UK however a credit against your UK tax liability can be claimed based on the amount of foreign tax that has been paid.
The foreign tax credit is restricted to the lower of:
a) The foreign tax paid on the income; and
b) The UK tax due on the same income.
As such, UK double taxation relief can be restricted and the end result is that the total tax liability is equivalent to the higher of the two tax rates. This can be inefficient where the other country has a lower tax rate than the UK as full relief is not available and residual UK tax is due.
Treaty Relief Via Limitation
Certain DTA articles provide UK double taxation relief by limiting the amount of tax that the UK can charge.
A common example is the dividend article which usually allows the source state to tax dividends for treaty non-residents but limits the total amount of tax that can be levied.
For example, the UK/France DTA allows the UK to tax UK dividends paid to UK treaty non-residents however the total tax levied cannot exceed 15% of the dividend.
It is important that your local position is also assessed as although the above allows the UK to levy up to 15% tax, the UK dividends may not be taxable in the UK for domestic non-residents under the Disregarded Income Rules.
Unilateral Relief
In the absence of a DTA, UK double taxation relief may be able to be claimed unilaterally. This is only possible if no DTA exists and we should claim relief under the DTA if possible.
Unilateral tax relief is claimed via a credit only on foreign taxes that have arisen in relation to non-UK sourced income.
A common example is USA state tax as the UK does not have DTAs with the specific US states. In this case, UK double taxation relief could be claimed on employment income relating to work duties physically performed in that state.
Similar provisions to the above foreign tax credit position apply namely that the foreign tax must have been paid and the credit available is limited to the lower of the foreign tax paid and the UK tax due.
Common Examples Of Double Taxation For Expats
Double taxation can arise on all forms of income and the majority have their own articles within the relevant DTA. Some common examples have been listed below however the specific DTA should be consulted as articles can vary between treaties.
Employment Income
Employment income is typically covered by Article 15 (Income From Dependent Services).
UK treaty residents can claim a foreign tax credit for overseas taxes paid in relation to non-UK workdays, and UK treaty non-residents can exempt the portion of their employment income relating to non-UK workdays.
Exemption may also be available against income relating to UK workdays for UK treaty non-residents however this requires the individual to be employed and paid overseas, and spend fewer than 183 days in the UK.
UK double taxation relief on employment income is often the most complex due to the sourcing of the income between multiple states and specialist advice is strongly recommended.
Interest Income
Covered by Article 11 of the Model Tax Convention, interest income is commonly solely taxable in the country of treaty residence.
UK treaty non-residents can therefore expect to exempt their UK sourced interest income from UK tax.
UK treaty residents are likely to have their foreign interest income taxed in the UK however local reliefs may be available including under the Foreign Income & Gains Regime.
Dividend Income
Dividend income is assessed under Article 10 of most treaties.
The source country often retains taxing rights over dividend income from that country however the total tax is commonly limited to 15% of the dividend income.
UK treaty non-residents will therefore continue to be taxed on their UK dividend income however a claim can be made to restrict the total tax due.
UK treaty residents will be taxed in the UK and abroad on their foreign dividend income however a foreign tax credit could be claimed in the UK to obtain UK double taxation relief.
Pension Income
Article 18 covers pension income however this is one of the most varied articles across different DTAs.
The common objective of this article is for all pension income to be taxable in the country of treaty residence regardless of where the pension is paid from. This is to reduce burdens on individuals who have accumulated pension funds in multiple countries by ensuring their taxation on retirement takes place in one country. It is therefore possible for individuals with UK pension funds to retire abroad and exit the UK tax system entirely.
Different rules apply to different pension payments (lump sums, annuities etc.) and different types of pensions (employment schemes, government service pensions, personal pensions etc.) therefore specialist advice is highly recommended.
How To Claim UK Double Taxation Relief
UK double taxation relief is usually claimed on a self-assessment tax return. Foreign tax credits are claimed on the ‘foreign’ pages and treaty relief via exemption or limitation is claimed via Helpsheet 302 or Helpsheet 304.
Self-assessment tax returns are due for submission by 31 January following the end of the tax year i.e. the deadline to file your 2025/26 UK tax return is 31 January 2027.
Should you require support preparing and filing your tax return including a claim for UK double taxation relief, please contact us at Expat Tax Solutions.
Common Mistakes To Avoid
Payment Of Foreign Tax
In order to claim UK double taxation relief via a foreign tax credit, the foreign tax must have been paid by the date that the claim is made. If the foreign tax credit is claimed before the foreign tax has been paid, the claim is invalid and may be rejected by HMRC.
Differing Tax Years
The UK tax year begins on 6 April and ends on the following 5 April whereas most countries have a calendar year tax year.
This difference should be reflected when claiming UK double taxation relief and calendar year documents such as earnings certificates and investment statements should not be used without further analysis to determine which UK tax year the income falls in.
Cash Flow Implications
Certain types of income may be subject to withholding tax however UK double taxation relief may not be able to be claimed until after the end of the tax year resulting in refunds on UK tax returns.
The delay in obtaining this refund can cause cash flow implications particularly if foreign tax bills become payable in the meantime.
For example, if foreign taxes are paid in June 2026 but UK double taxation relief cannot be obtained until submission of the 2026/27 UK tax return which has a deadline of 31 January 2028, the individual may not be able to claim relief until over a year after the foreign tax has been paid.
Obtaining advice as early as possible is key to mitigating cash flow implications and maximising claims for UK double taxation relief.
Minimising Foreign Tax Paid
In order to claim UK double taxation relief via a foreign tax credit, HMRC require the individual to minimise their total foreign tax liability where possible. This commonly includes filing an overseas tax return and making any relevant claims to reduce their liability.
UK Double Taxation Relief FAQs
Am I eligible to claim UK double taxation relief?
If you are taxable in two countries on the same income then you should be eligible for UK double taxation relief or relief in the other country. The full list of countries with which the UK has a Double Taxation Agreement can be found here.
How much UK double taxation relief can I claim?
The maximum claim for UK double taxation relief is often limited to the lower of the UK tax due and the foreign tax due. The end result is often that the individual pays the higher of the two tax rates and you should not expect to pay more total tax than either single country can levy.
What records should I keep for UK double taxation relief?
You should keep records of all income received and taxes paid. This includes:
- Payslips for employment and pension income.
- Investment summaries.
- Copies of foreign tax returns showing foreign taxes paid.
Can I claim UK double taxation relief for prior tax years?
You can typically claim UK double taxation relief for the previous four tax years via either a self-assessment tax return or via an Overpayment Relief Claim.
HMRC also allow for claims made by the extended deadline of 31 January following the tax year in which the foreign tax was paid if this is later.
Get Expert Help With UK Double Taxation Relief
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