UK Foreign Income Tax Calculator

Why the same income can be taxed twice

If you are UK resident, HMRC taxes you on your worldwide income. Rent from a flat in Lisbon, a dividend from a US brokerage, freelance work invoiced to a German client: all of it lands on your Self Assessment return, converted into pounds at the exchange rate for the relevant period. The problem is that the country where the income arose has usually already taken a slice at source. Without a fix, you would pay tax twice on one pound of earnings. Foreign Tax Credit Relief, set out in the double-taxation treaties the UK holds with more than 130 countries, is that fix. This calculator models the mechanics so you can see the real top-up bill before you file.

How the credit is capped, not refunded

The rule people get wrong is that the foreign tax is credited, never refunded. HMRC compares the UK tax due on that income with the foreign tax already paid, and gives you relief equal to the lower of the two. If the overseas country charged more than the UK would have, the excess is simply lost. You cannot use it to reduce tax on your salary or your ISA-sheltered savings. That is why the credit in this tool is calculated as the minimum of foreign tax paid and the UK liability on the same slice.

A £20,000 dividend taxed at 15 percent abroad

Take the default figures. You receive £20,000 of foreign dividend income and the source country withheld £3,000, a 15 percent rate. You are a higher-rate taxpayer, so your UK marginal rate is 40 percent. The UK liability on that income is £8,000. The foreign tax of £3,000 is fully credited because it is below the UK figure, leaving £5,000 of extra UK tax to pay through Self Assessment.

Who this is for, and the trap to watch

This tool is built for UK residents with one clean stream of foreign income, expats who have kept overseas assets, and anyone weighing up an offshore investment. It is deliberately a per-source estimate. The common mistake is treating the headline foreign rate as the credit. Some treaties cap the rate the source country is allowed to withhold, often at 10 or 15 percent on dividends, and if you were over-taxed at source the correct route is to reclaim the excess from that country, not from HMRC. My practical tip: keep the original withholding certificate and the exchange rate you used, because HMRC can ask you to evidence both the income figure and the foreign tax claimed.

One change reshaped this area from April 2025. The remittance basis, which let non-domiciled residents keep unremitted foreign income outside UK tax, was abolished and replaced by a residence-based four-year exemption for new arrivals. If you arrived recently you may not be taxed on this income at all yet, so check your residence position before assuming a liability. Scottish taxpayers should also note that while the foreign tax credit works identically, the UK liability is computed using Scottish income tax bands, which differ from the rest of the UK, so a higher-rate Scottish marginal rate may sit at 42 percent rather than 40.

Do I still report income if the foreign tax matches the UK tax?

Yes. Even when the credit wipes out the UK liability entirely, you must still declare the income on the foreign pages of your Self Assessment return. The relief only works because you have reported the income and claimed the credit against it. Skipping the declaration is what turns a neutral position into a penalty.

What exchange rate should I use for the conversion?

HMRC accepts the spot rate on the date the income arose, an average rate for the year, or the monthly rates it publishes. Pick one consistent method and apply it to both the income and the foreign tax. For irregular receipts the published monthly rate is usually the cleanest to defend.