If you're a UK resident receiving dividends from US companies, you'll find there's a special tax treaty in place that affects how much tax you pay, and where you pay it.

When you invest in US companies, you enter the world of international tax treaties.

The W-8BEN Form

The first thing you must do is complete a W-8BEN form with your broker. This form declares that you are not a US person for tax purposes. By completing this, you get the benefit of the UK/US tax treaty, which reduces the amount of tax withheld by the US tax authority (the IRS) on your dividends from 30% down to 15%.

How it's taxed in the UK

As a UK resident, you must still declare this US dividend income on your UK tax return. The good news is that you can claim Foreign Tax Credit Relief for the 15% tax you've already had withheld in the US. This credit reduces your UK tax liability on those dividends, ensuring you are not taxed twice.

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