Abolition of the notional tax credit on dividends received by non-UK residents
Published 26 November 2025
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This publication is available at https://www.gov.uk/government/publications/abolition-of-the-dividend-tax-credit-for-non-uk-residents/abolition-of-the-notional-tax-credit-on-dividends-received-by-non-uk-residents
Who is likely to be affected
This measure will affect individuals who are non-UK resident and receive dividend income from UK companies, who also receive UK rental or partnership income.
General description of the measure
Non-UK residents with both UK dividend income and UK rental or partnership income are allocated the better of two alternatives to determine their UK tax position. The first alternative is that the entirety of their UK income is assessed, they may claim their Personal Allowance, and their UK dividends are granted a tax credit at the Ordinary Rate.
The second alternative is that only their UK rental or partnership income is taxable, however they may not claim their Personal Allowance. This tax credit was initially introduced to match the Ordinary Rate tax credit on dividends for UK residents but was not repealed when the UK resident tax credit was abolished.
This measure abolishes the tax credit and brings non-UK residents in line with UK residents.
Policy objective
This measure will improve fairness in the UK tax system as it will prevent non-UK residents from receiving a tax credit which is not available to UK residents.
Background to the measure
This measure was announced at Budget 2025.
Detailed proposal
Operative date
The measure will have effect for distributions received on and after 6 April 2026.
Current law
The current law is included in Chapter 3 of Part 4, section 399 Income Tax (Trading and Other Income) Act 2005 (‘section 399’).
Proposed revisions
This measure will repeal the legislation at section 399, which will have the effect of abolishing the notional tax credit.
Consequential changes will also be made to omit references to section 399 from the Income Tax Act 2007, Taxes Management Act 1970 and Unauthorised Unit Trust Regulations 2013.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| negligible | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will not impact UK resident individuals. It will impact fewer than 1,000 non-resident individuals a year with UK dividend income and UK rental or partnership income, who will no longer receive the notional tax credit in relation to UK dividends.
This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC as the change will not result in any new obligations or alter any processes. These individuals will continue submitting a Self Assessment to HMRC, and the information required from the individual has not changed.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure will impact individuals who are non-UK resident and receive dividends from UK companies and UK rental or partnership income.
HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot make an assessment of the impacts on those with shared protected characteristics.
Administrative impact on business including civil society organisations
This measure will have a negligible impact on businesses as it concerns the taxation of individuals. Businesses that provide tax advice to individuals will need to be aware of the impact of this measure on their clients.
One-off costs will include familiarisation with the changes. It is not anticipated they will incur any continuing costs.
Customer experience is expected to remain broadly the same as this measure does not alter how businesses interact with HMRC.
This measure is not expected to impact civil society organisations.
Operational impact (£ million) (HMRC or other)
Changes to the Income Tax Self Assessment system will be made. These changes are anticipated to cost in the region of £2.32 million.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns and internal HMRC compliance risk evaluation work.
Further advice
If you have any questions about this change, contact the Personal Tax International Policy Team by email: personaltaxinternational@hmrc.gov.uk.