---
title: "Tax on US Dividends: UK Investor Guide (2026/27)"
description: "For UK investors and expatriates holding US equities, the taxation of cross-border dividends involves navigating both domestic UK legislation and the UK-US Double Taxation Agreement (DTA). In the 2026/27 tax year, the UK government has implemented significant rate increases for…"
url: "https://www.accountingfirms.co.uk/knowledge-bank/tax-on-us-dividends/"
updated: "2026-08-11"
category: "Expat & Non-Resident Tax"
---

# Tax on US Dividends: UK Investor Guide (2026/27)

For UK investors and expatriates holding US equities, the taxation of cross-border dividends involves navigating both domestic UK legislation and the UK-US Double Taxation Agreement (DTA). In the 2026/27 tax year, the UK government has implemented significant rate increases for dividend income and completely overhauled how it taxes foreign income for non-domiciled individuals.

Understanding the interplay between US withholding tax, UK income tax, and foreign tax credits is essential to legitimately minimise double taxation.

## The UK Charge on Foreign Dividends

Section 402 of the [Income Tax](https://www.accountingfirms.co.uk/blog/hmrc-payment-niers/) (Trading and Other Income) Act 2005 (ITTOIA 2005) establishes the primary statutory charge on foreign dividends. The legislation explicitly charges income tax on dividends received from non-UK resident companies.

> "(1) Income tax is charged on dividends of a non-UK resident company... (4) In this Chapter “dividends” does not include dividends of a capital nature."

Therefore, standard cash dividends paid by US corporations fall immediately into the UK tax net, provided the recipient is a UK tax resident.

## US Withholding Tax and Form W-8BEN

The United States imposes a default 30% withholding tax on dividends paid to non-US residents. However, Article 10 of the UK-US Double Tax Agreement restricts this withholding tax rate for UK residents. For individual portfolio investors, the treaty caps the US withholding tax at 15%.

To legitimately claim this reduced 15% rate, UK investors must proactively submit a Form W-8BEN to their US broker or financial institution.  On the form, the investor must cite Article 10 of the treaty to confirm their entitlement to the reduced rate.  The W-8BEN form generally remains valid for three years before the investor must renew it.

## Claiming Foreign Tax Credit (FTC)

Even with the W-8BEN in place, the investor suffers 15% taxation in the US, while the UK simultaneously seeks to tax the same income under ITTOIA 2005. To prevent this juridical double taxation, Article 24 of the UK-US DTA permits the UK resident to claim a [Foreign Tax](https://www.accountingfirms.co.uk/blog/what-is-carer-allowance/) Credit (FTC).

The investor can offset the 15% US tax withheld directly against their UK income [tax liability](https://www.accountingfirms.co.uk/blog/in-with-the-new-basis-period-rules/) on those specific US dividends.  The UK restricts this credit to the actual amount of UK tax due on the foreign income; if the UK tax liability on the dividend is lower than 15% (for example, if it falls within the tax-free allowance), the excess US tax is not refundable by HMRC.

## UK Dividend Tax Rates: 2026/27 Increases

The *Finance Act 2026* increases the [tax rates](https://www.accountingfirms.co.uk/blog/interesting-dividends/) applied to dividend income from 6 April 2026 to ensure income from assets is taxed more fairly compared to income from employment.

While the tax-free dividend allowance remains frozen at £500 under section 13A of the Income Tax Act 2007 (ITA 2007), the ordinary and upper rates have risen.

| Tax Band | 2026/27 Dividend Rate | Statutory Reference |
| --- | --- | --- |
| **Dividend Nil Rate (Allowance)** | 0% (on the first £500) | ITA 2007 s 13A |
| **Dividend Ordinary Rate (Basic)** | 10.75% | FA 2026 s 4(1)(a) |
| **Dividend Upper Rate (Higher)** | 35.75% | FA 2026 s 4(1)(b) |
| **Dividend Additional Rate** | 39.35% | Current Law Maintained |

## The Impact of the 2025/26 FIG Regime

The [tax landscape](https://www.accountingfirms.co.uk/blog/remittance-basis/) for individuals who previously relied on the remittance basis changed permanently from 6 April 2025. The *Finance Act 2025* abolished the domicile-based remittance system, replacing it with a residence-based 4-year Foreign Income and Gains (FIG) regime.

Under the FIG rules, qualifying "new arrivals" (individuals who were non-UK resident for the 10 consecutive years prior to arrival) receive 100% [tax relief](https://www.accountingfirms.co.uk/blog/disincorporation-some-practicalities/) on their foreign income, including US dividends, for their first four years of UK residence.  During this four-year window, they can bring their US dividends into the UK entirely tax-free.

However, claiming this relief carries a notable trade-off. Under section 845E of ITTOIA 2005, any individual who makes a foreign income claim under the FIG regime automatically forfeits their entitlement to the UK [Personal Allowance](https://www.accountingfirms.co.uk/blog/tax-code-1257l/) for that tax year.  Tax advisors must calculate whether sacrificing the £12,570 tax-free allowance is worth the 100% exemption on the US dividend income.

 

*Consider researching how the Temporary Repatriation Facility (TRF) allows former remittance basis users to remit historic, pre-April 2025 US dividends to the UK at a reduced 12% flat rate during the 2026/27 tax year.*