Taxation on Non-UK Residents
For a non-UK tax resident, certain types of income that arise or are earned from the UK are subject to UK income tax, and some others are not. The UK-source income includes dividends, interests, rental income, or royalty, etc. Each of those types may be further divided into sub-classes.
Non-residents can run down the following 5 steps to obtain the knowledge about the withholding tax position.
| UK‑source income arises | |||||
| STEP 1 — Identify the “category of income” | |||||
| • Bank / savings interest | → Investment income | ||||
| • Dividends from UK companies | → Distribution income | ||||
| • Rental income from UK property | → Property business income | ||||
| • Interest on loans to a UK company | → Commercial / other interest income | ||||
| STEP 2 — Apply the “domestic UK tax rules” | |||||
| → ITA 2007, Part 9A (Disregarded income) | |||||
| For *non‑resident individuals* : | |||||
| • UK bank interest | → Disregarded (no UK tax) | ||||
| • UK company dividends | → Disregarded (no UK tax) | ||||
| • UK rental income | → Taxable in UK | ||||
| • Interest from UK borrower (e.g., company holding buy-to-let property) | |||||
| → Normally taxable via withholding at 20% unless treaty relief applies. | |||||
| STEP 3 — Consider “withholding tax (WHT) obligations” | |||||
| • Bank interest | → Usually paid gross (no WHT) | ||||
| • Dividends | → No WHT since 2016 | ||||
| • Company loan interest | → 20% WHT default (Form CT61 filing) | ||||
| • Rental income | → No WHT; tax via self‑assessment or Non-Resident Landlord (NRL) scheme | ||||
| STEP 4 — Apply “Double Tax Agreement (DTA)” if relevant | |||||
| • If DTA has provision to limit or remove UK taxing rights: | |||||
| the non-UK resident can apply for relief (e.g., to pay interest gross). | |||||
| HMRC must confirm via direction letter before ceasing WHT. | |||||
| • The DTA will usually confirm: | |||||
| Interest | → 0% taxable in HK only | ||||
| Dividends | → 0% UK WHT | ||||
| Property income | → taxable where property is situated (UK) | ||||
| WHT rates under UK DTA | → [read] | ||||
| STEP 5 — Final UK tax outcome (summary) | |||||
| Type of income | UK domestic rule | DTA effect | Result | ||
| Bank interest | Disregarded income | Same | No UK tax | ||
| UK dividends | Disregarded income | Same | No UK tax | ||
| Property rental | Taxable | Same | UK tax due | ||
| Loan interest | Withholding at 20% | Can be 0% | Relief via DTA | ||
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