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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

Remittance Basis: Introduction to the Remittance Basis: Comparisons with pre-April 2008 regime: Other changes - higher rate tax charge on foreign dividends

Historically, foreign dividend income remitted to the UK was charged at the basic rate or higher rate of tax dependent on the circumstances of the individual concerned, instead of the usual dividend rates.

However for the tax years 2005-06, 2006-07 and 2007-08, the tax law rewrite project for ITTOIA 2005 unintentionally changed the rate at which foreign dividend income remitted to the UK by a higher-rate paying individual who was taxed on the remittance basis. This meant that in these years foreign dividends were charged at the upper dividend rate of 32.5%, instead of the higher tax rate for those years, which was 40%.

The position has been corrected with effect from 6 April 2008. Foreign dividends remitted to the UK after that date by an individual who is chargeable to tax on the remittance basis are, where applicable, charged at the higher rates of tax.