Can someone please confirm my understanding of this please?
Tax payer has Australian employment income of £25k which has been taxed significantly in Australia.
UK Income is rental income £4k and dividends £19k. Without foreign employment income no UK tax due as not hitting higher rates. If add in employment income will be tax on dividends in higher rate so can I claim FTCR on the additional tax due?
Guidance says FTCR is lower of foreign tax paid and additional tax due on this source of income but as dividends always top slice is this correct?
Thanks
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You have lost me
I assume that despite earning £25k in Australia during the tax year, he is UK resident for the entire tax year and that the split year treatment does not apply to exclude the Australian income from the UK tax return.
The Australian tax deducted from his Australian salary can be set against the UK tax due on his Australian salary. As dividends are the top slice, all the UK tax on his Australian salary will be at the basic rate. The relief is restricted to the lesser of the Australian and UK tax payable on the same income.
If inclusion of his Australian salary pushes his total income for the year into the higher rate tax band, so that some of the UK dividends are taxable at the higher dividend rate, so be it. He will have to pay the additional tax of 25% of the net dividend on the gross dividends falling into the higher rate band.