UK Self Assessment - Foreign Interest Income Question

Hello there,

On the UK self assessment return for 11-12 you have to declare foreign income like interest. There is about $7 of interest paid to declare from the US 2011 return.

The UK form asks what tax was paid on it in the foreign country. As this was in the US personal allowance no tax was paid. Therefore I assume tax needs to be paid in the UK.

One question is - it appears HMRC want foreign income calculated based on the exchange rate at the time it was paid. As the interest was paid monthly does this mean 12 different exchange rates? Seems ridiculous for such small interest.

Secondly, the UK tax year is different and covers the first three months of 2012. This income has not been dealt with on the US 2012 return as it hasn't been prepared. Therefore although I am 100% confident no tax will be owed in the US for 2012 for the interest, how can someone confidently write on the UK return 'no tax paid' when tax could be payable if the figures were different?

Many thanks

If this is the only foreign income and you are not UK domiciled it would not be reported as it is less than £2,000.

If it is reportable the US tax would always be zero as the UK has primary taxing rights under the treaty, so the US would give credit for any UK tax paid or accrued.

Thanks Guya. Definately resident/domicile in the UK so the £2,000 exception wouldn't apply. 

I didn't realise that US sourced interest is primarily taxable in the UK in these circumstances.  As the interest amounts have been so low they have been put on the 1040 as subject to US tax but always come well under the US personal allowance so no tax is due. 

Thanks Guya. Definately resident/domicile in the UK so the £2,000 exception wouldn't apply. 

I didn't realise that US sourced interest is primarily taxable in the UK in these circumstances.  As the interest amounts have been so low they have been put on the 1040 as subject to US tax but always come well under the US personal allowance so no tax is due. 

Article 23 of the treaty is an interesting read and will tell you who has primary taxation authority for your particular circumstances and types of income and gains

Hi Guya, where can I find the treaty? thanks