Foreign Tax Credit Relief (FTCR) UK 2026/27: Worked Examples
How UK Foreign Tax Credit Relief works in 2026/27: the credit is the lower of the foreign tax and the UK tax on the same income. Four worked examples.
How the credit is worked out
HMRC's helpsheet HS263 sets out the rule: the credit is the lower of the foreign tax paid (or the amount allowed under a double taxation agreement) and the UK tax on that income. The UK tax on the item is your total UK tax with it, minus your total UK tax without it. Each source is worked out separately, and allowances can be allocated in the way that gives the most relief.
Worked examples (2026/27)
Each example assumes the taxpayer's other income already uses the basic-rate band, so the foreign item is taxed at the 2026/27 rest-of-UK higher rate of 40% (or the dividend upper rate of 35.75%). The foreign tax amounts are assumptions for illustration, not any country's actual rate. Scottish taxpayers pay Scottish rates on non-savings, non-dividend income such as rental profit.
| Income type | Income | Foreign tax (assumed) | UK tax before credit | FTCR | UK tax after credit | Total tax | Note |
|---|---|---|---|---|---|---|---|
| Overseas rental profit | £20,000 | £4,800 | £8,000 | £4,800 | £3,200 | £8,000 | Foreign tax below UK tax: full credit, UK collects the difference. |
| Overseas dividend | £5,000 | £750 | £1,788 | £750 | £1,038 | £1,788 | Dividend allowance assumed used on UK dividends, so the whole item is taxed at the dividend upper rate. |
| Overseas interest, high foreign tax | £4,000 | £1,800 | £1,600 | £1,600 | £0 | £1,800 | Personal Savings Allowance assumed used on UK interest. Foreign tax above UK tax: credit capped at the UK tax; the excess is not credited. Unrelieved foreign tax: £200. |
| Income where no foreign tax was paid | £30,000 | £0 | £12,000 | £0 | £12,000 | £12,000 | No foreign tax, so no credit; full UK tax. |
Where the double taxation agreement limits the foreign tax rate, only the treaty amount counts towards the credit; any excess has to be reclaimed from the other country. Rates vary by treaty and by type of income, and the agreements are published in the gov.uk tax treaties collection.
Frequently asked questions
What is Foreign Tax Credit Relief?
A credit that a UK resident can set against UK tax for foreign tax paid on the same income or gain, so the same income is not fully taxed twice. It is claimed through Self Assessment on the foreign pages (SA106).
How much Foreign Tax Credit Relief can I claim?
The lower of the foreign tax paid (or the amount allowed under the double taxation agreement, if that is less) and the UK tax on that income or gain. The UK tax on the item is the difference between your UK tax with and without it. Foreign tax above that amount is not credited.
How do I claim Foreign Tax Credit Relief?
Report the foreign income and the foreign tax on the SA106 foreign pages of your Self Assessment return and claim the relief there. HMRC helpsheet HS263 explains the calculation, including working out each source separately.
What if foreign tax was taken at more than the treaty rate?
The credit is limited to the rate the double taxation agreement allows. You may be able to reclaim the excess from the foreign tax authority. Where an agreement requires you to claim tax back from the other country, you cannot claim Foreign Tax Credit Relief for it instead.
Is there an alternative to the credit?
Yes. Deduction relief reduces the foreign income charged in the UK by the foreign tax paid instead of giving a credit. HS263 says it is generally only better where you have no UK tax liability for the year, for example because of losses.