What is Foreign Tax Credit Relief?

Foreign Tax Credit Relief (FTCR) allows UK resident taxpayers to reduce their UK tax liability by the amount of tax they have already paid overseas on the same income. It prevents double taxation — paying tax on the same income in both the overseas country and the UK.

How much foreign tax credit can I claim?

The foreign tax credit is limited to the lower of: (1) the actual foreign tax paid on the income, and (2) the UK tax that would be due on that same income. You cannot get a refund if foreign tax exceeds UK tax — the excess is not repayable.

What if I paid more foreign tax than my UK tax on the same income?

If the foreign tax paid exceeds the UK tax on that income, the credit is capped at the UK tax amount. The excess foreign tax is not refundable and cannot be carried forward (under the credit method). The income simply becomes tax-free in the UK.

Which countries have a double taxation agreement with the UK?

The UK has double taxation agreements (DTAs) with over 130 countries including the US, Germany, France, Australia, Canada, UAE, India and most EU member states. The specific terms — including whether the credit or exemption method applies — vary by treaty and income type.

Do I need to claim FTCR on my self-assessment return?

Yes. Foreign Tax Credit Relief must be claimed on your UK Self Assessment tax return (SA return). You declare the foreign income and tax paid, and the relief is calculated and applied automatically through the return. Documentary evidence of foreign tax paid should be retained.

Can I get credit for withholding tax?

Yes. Withholding tax deducted at source by a foreign country on dividends, interest or royalties typically qualifies for FTCR. The treaty rate may limit the withholding tax to a specific percentage (e.g. 15% on dividends), and only that amount is creditable.

Is there a time limit for claiming Foreign Tax Credit Relief?

Yes. FTCR claims must generally be made within 4 years of the end of the tax year to which the claim relates. Late claims may be refused unless there are exceptional circumstances. Always file your self-assessment return in time.

How does FTCR work for employment income?

For employment income, UK residents are taxed on worldwide employment income under the arising basis. Any income tax paid overseas on those earnings qualifies for FTCR, limited to the UK tax on the same income. The Overseas Workday Relief may also be relevant for those in their first years of UK residence.

Can FTCR be claimed on overseas rental income?

Yes. UK residents with overseas rental property are taxed on those rents in the UK. Any local property income tax, rental tax or withholding tax paid in the country where the property is located qualifies for FTCR against the UK tax on the same rental income.

What happens if the overseas tax is refunded?

If you subsequently receive a refund of foreign tax for which you have already claimed FTCR in the UK, you must notify HMRC. The refunded amount will be treated as additional UK taxable income in the year it is received, or your prior-year return may need to be amended.

Foreign Tax Credit Relief Calculator 2025/26

Q: What is the credit method vs the exemption method?

Under the credit method (most common), you include overseas income in your UK return and then deduct the foreign tax paid as a credit. Under the exemption method (available under some treaties), the overseas income is simply excluded from UK taxation altogether. The better method depends on the relative tax rates.

How Foreign Tax Credit Relief Works

As a UK resident, you are subject to UK tax on your worldwide income and gains. This means income earned in another country is taxable in both that country (at source) and in the UK. Foreign Tax Credit Relief prevents this double taxation by allowing you to offset the tax paid abroad against your UK liability on the same income.

The credit method is the most common approach and is the default under UK domestic law and most tax treaties. You include the overseas income in your UK self-assessment return at the gross amount, calculate UK tax on it, then deduct the foreign tax as a credit. The credit cannot exceed the UK tax on that income — any excess foreign tax is simply wasted under the credit method.

Credit Method vs Exemption Method

Feature	Credit Method	Exemption Method
Overseas income in UK return	Included at gross	Excluded entirely
UK tax on overseas income	Calculated then reduced by credit	Zero — income is exempt
Better when foreign tax rate is…	Lower than UK rate	Higher or equal to UK rate
Available under	UK domestic law + most treaties	Some specific treaties only

The exemption method can be more beneficial when the overseas country taxes at a higher rate than the UK, since under credit method excess foreign tax is wasted. However, exemption must be available under the relevant treaty.

The FTCR Formula

UK tax on overseas income = Overseas income × UK rate
Foreign tax credit = min(Foreign tax paid, UK tax on overseas income)
Net UK tax = UK tax − Foreign tax credit
Total worldwide tax = Foreign tax paid + Net UK tax
Effective rate = Total worldwide tax ÷ Overseas income

Frequently Asked Questions

Foreign Tax Credit Relief (FTCR) allows UK resident taxpayers to reduce their UK tax liability by the amount of tax already paid overseas on the same income. It prevents double taxation on income that is taxable in both the UK and the source country.

The foreign tax credit is capped at the lower of: (1) the actual foreign tax paid on the income, or (2) the UK tax due on that same income. If foreign tax exceeds UK tax, the excess is not refundable and cannot be carried forward under the standard credit method.

Under the credit method, you include overseas income in your UK return and deduct foreign tax as a credit against UK tax. Under the exemption method (available under some tax treaties), the overseas income is excluded from UK taxation altogether. The better method depends on relative tax rates in each country.

If foreign tax paid exceeds the UK tax on that income, your credit is capped at the UK tax amount — the overseas income is effectively free of UK tax. The excess foreign tax is not refunded and cannot be used elsewhere or carried forward under the credit method.

The UK has double taxation agreements (DTAs) with over 130 countries including the US, Germany, France, Australia, Canada, India, UAE, and most EU member states. The treaty terms — including which method applies and withholding tax caps — vary by country and income type.

Yes. FTCR must be claimed on your UK Self Assessment return. You declare the foreign income and the tax paid, and the relief is applied through the return. Keep documentary evidence of foreign tax paid — such as overseas tax assessments, tax payment receipts, or withholding tax certificates.

Yes. Withholding tax deducted at source by a foreign country on dividends, interest or royalties qualifies for FTCR. Treaty rates may cap the withholding to a specific percentage, and only that creditable portion is used in the FTCR calculation.

FTCR claims must generally be made within 4 years of the end of the relevant tax year. Amended returns to add or correct FTCR claims must similarly be submitted within this window. Late claims may be refused.

UK residents are taxed on worldwide employment income. Any income tax paid overseas on those same earnings qualifies for FTCR, limited to the UK tax on that employment income. Overseas Workday Relief (OWR) may be relevant alongside FTCR for those in their early years of UK residence.

Yes. UK residents with overseas rental property are taxed on those rents in the UK. Any local property tax, rental income tax or withholding tax paid in the country where the property is located can be credited against the UK tax on the same rental income.

If you subsequently receive a refund of foreign tax for which you have already claimed FTCR, you must notify HMRC. The refunded amount will typically be treated as additional UK taxable income or require amendment of your self-assessment return. Prompt disclosure is important.

Yes. FTCR also applies to overseas capital gains. UK residents are taxed on worldwide gains and any foreign CGT paid on the same gain can be credited against UK CGT, subject to the same cap: the credit cannot exceed the UK CGT on that same gain.