Skip to content 
UK Tax on Foreign Interest
Tax on Foreign Interest
If you are looking for advice on UK tax on foreign interest and need to know about your tax liability and self assessment tax return, read our FAQ, call our office or book an appointment or email us your enquiry.
Get Compliance Advice on Tax on Foreign Interest
UK Tax on Foreign Interest
If you’re a UK resident with money in overseas bank accounts, the interest you earn doesn’t escape HMRC’s radar. Whether it’s savings in a European bank, fixed deposits overseas, or investment accounts abroad, UK residents are taxed on their worldwide income, which includes foreign interest. This means that even if the money never comes into the UK, it still needs to be reported on your Self-Assessment tax return.
Depending on your total income, the Personal Savings Allowance may reduce or remove the tax bill, but disclosure is always required.
Stay Compliant and Minimise Tax Liabilities
Foreign banks often deduct withholding tax before paying you interest, which can leave you worried about double taxation. The good news is that the UK has double tax treaties with many countries, allowing you to claim relief and avoid being taxed twice. Accurate reporting, supported by bank statements and certificates of tax deducted, ensures you pay the right amount and remain compliant with HMRC. Professional guidance can also help you make use of allowances and reliefs, while structuring your savings efficiently for the future. If you hold overseas accounts, taking action early will not only reduce stress but may also cut your tax bill.
Do you need help with your Tax Return Filling?
Schedule a free 30‑minute consultation to discuss your personal tax compliance.
Whether you need help with simple tax returns or complex issues, we’ve designed our service to ensure you feel supported, informed, and in control every step of the way.
Get expert tax advice without visiting an office. Our virtual consultations can review, plan, and resolve your tax matters.
Book a consultation with a tax expert to identify any issues and receive the most effective strategy for future compliance.
Appointments can be scheduled online, by phone, or in person with a tax advisor. Contact our office to discuss your needs and next steps.
The values we live by
Honesty guides everything we do. We believe in transparent advice, accurate reporting, and doing what’s right for our clients every time.
We live and breathe tax. Our expert team delivers up-to-date, accurate advice so clients stay compliant, efficient, and ahead of the curve.
Every client matters. We take time to listen, understand your needs, and deliver personalised tax solutions with care and attention to detail.
OUR SERVICES
Our Practice Areas
We are a team of specialist tax advisors who are delivering expert guidance on tax compliance, international tax, HMRC investigations, business structuring, capital gains, inheritance tax, corporation tax and self assessment services.
We know personal taxes can be overwhelming. With us, your returns are accurate, on time, and tailored to your unique life.
We know running a business is hard enough. Let us handle your business taxes so you can focus on growth with confidence.
We know smart planning makes a difference. Our tax strategies help you stay compliant, save more, and plan for the future.
We know living abroad brings tax challenges. Whether in or out of the UK, we make your expat taxes smooth and stress-free
We know HMRC enquiries can be daunting. Count on us for expert support and peace of mind during your tax investigation.
We know unfair tax bills cause stress. If you disagree with HMRC, we’ll guide your tax appeal with precision and confidence.
We are leading network of qualified accountants, tax advisors and specialist business consultants in United Kingdom
Get an appointment with our Expert
To your situation
Your Questions - Our Answers
We are here to help you with any questions you may have
Do I have to pay UK tax on interest from overseas bank accounts?
If you are a UK resident, HMRC expects you to declare all worldwide income, which includes interest earned from savings or deposits in overseas bank accounts. This applies whether the money is kept abroad or transferred into the UK. The interest is added to your overall income and taxed at your marginal rate, just like interest earned from UK banks.
Some people assume that if tax has already been deducted abroad, they don’t need to declare it in the UK. That’s not the case. You still have to report the gross amount on your Self-Assessment tax return, and you can usually claim Foreign Tax Credit Relief to prevent being taxed twice.
The UK also offers a Personal Savings Allowance, which can reduce or even eliminate the UK tax due on your interest, depending on your total income. For example, basic-rate taxpayers can earn up to £1,000 of savings interest tax-free each year.
What if I’m a non-resident—do I still pay UK tax on foreign interest?
If you are a non-resident for UK tax purposes, your foreign interest is generally not taxable in the UK. Instead, it is taxed in the country where the account is held, subject to that country’s local tax rules. Non-residents are only taxed in the UK on UK-sourced income, such as UK rental profits, employment, or UK bank interest.
That said, residency must be determined carefully using the Statutory Residence Test (SRT). Spending too many days in the UK or maintaining strong ties could make you resident again, bringing your foreign income back into the UK tax net. If you’re planning to leave or return to the UK during a tax year, split-year treatment may apply. This divides the tax year into a resident and non-resident part, which can reduce your liability on overseas interest.
Do I need to declare my overseas interest on a UK tax return?
Yes, UK residents must declare overseas interests on their Self-Assessment tax return. Even if the amount seems small or tax has already been deducted abroad, full disclosure is required. HMRC receives data directly from many foreign banks under international exchange agreements, so undeclared income can easily come to light.
On your tax return, you should enter the gross amount of interest earned before any foreign tax was deducted. If you qualify for relief under a double tax treaty, you can then claim a credit for the tax already paid abroad. Failing to declare overseas income can lead to interest, penalties, and investigations. Being upfront not only keeps you compliant but can also ensure you benefit from allowances such as the Personal Savings Allowance.
What happens if I’ve already paid tax on my interest abroad?
Many countries apply withholding tax before paying interest. If this happens, you still need to declare the gross amount in the UK, but you can usually claim Foreign Tax Credit Relief, so you’re not taxed twice.
The relief works by offsetting the foreign tax already paid against your UK liability. If the overseas tax rate is higher than the UK rate, you won’t get a refund of the difference, but you won’t pay more in the UK. If the overseas rate is lower, you’ll need to top up the payment to match UK rates. Keep bank statements and tax certificates issued by your overseas bank, as HMRC will expect evidence to support your claim.
How does the Personal Savings Allowance affect foreign interest?
The Personal Savings Allowance (PSA) applies to both UK and foreign interest. If you are a basic-rate taxpayer, you can earn up to £1,000 of savings interest tax-free each year. Higher-rate taxpayers have an allowance of £500, while additional-rate taxpayers receive no PSA.
This allowance applies to total savings interest, not just UK bank accounts. So if you earn £400 interest from a UK account and £300 from an overseas account, that’s £700 in total—well within the PSA if you are a basic-rate taxpayer. Using the PSA effectively can help reduce or even eliminate the UK tax due on foreign savings income, but it still needs to be declared on your Self-Assessment return.
What if my foreign bank interest is very small?
Even small amounts of foreign interest must be declared if you are a UK resident. While the Personal Savings Allowance may cover the liability, HMRC requires complete disclosure. Omitting “minor” income can still result in penalties if discovered.
The reporting threshold is not based on the size of the income but on whether you are within Self-Assessment. If you are required to file a return, you must include all interest, no matter how small. In practice, if your only income is PAYE employment and your foreign interest is tiny, you may not need a tax return. However, it is always safer to check with HMRC or a tax adviser.
How does HMRC know about my foreign interest?
HMRC participates in international agreements where tax authorities share information on bank accounts and investments. This means HMRC can receive details of your overseas accounts, including balances and interest earned, even if you don’t disclose them yourself.
Because of this data-sharing, undeclared foreign income is more likely to be discovered. HMRC can then open an enquiry, charge back taxes, add interest, and impose penalties. The safest approach is always to declare all foreign interests voluntarily. Doing so not only avoids penalties but may also give access to reliefs and allowances you would miss otherwise.
How do double tax treaties affect foreign interest?
Double tax treaties are agreements between the UK and other countries that prevent the same income from being taxed twice. For interest, treaties usually set limits on the rate of tax that the source country can deduct before paying you.
If the treaty gives the UK the right to tax your interest, you can reclaim some or all of the foreign tax withheld. If the treaty allows both countries to tax, you can use Foreign Tax Credit Relief to avoid paying twice.
Checking the relevant treaty is essential to know where and how your interest will be taxed. This can make a significant difference to your final liability.
Do offshore savings accounts get taxed differently?
No, offshore savings accounts are treated the same as any other foreign bank account. For UK residents, interest earned offshore is fully taxable in the UK and must be reported. Offshore accounts often pay gross interest without deducting tax at source, but this does not mean the income is tax-free. It must still be declared in the UK, and HMRC takes offshore disclosures particularly seriously.
Using offshore accounts may offer currency or investment flexibility, but they do not remove your obligation to pay UK tax.
How can I reduce the UK tax on my foreign interest legally?
There are several ways to manage your tax on foreign interest:
- Use your Personal Savings Allowance and starting rate for savings if eligible.
- Structure your savings to minimise withholding tax, often by claiming treaty relief in advance.
- Consider where you are tax resident—if you are genuinely non-resident, foreign interest may fall outside UK tax altogether.
- Keep accurate records to ensure you can claim relief for any overseas tax paid.
Professional planning can help align your foreign savings with UK rules, reducing the tax you owe while keeping you compliant with HMRC.
UK Tax on Foreign Interest
UK residents who act as a representative for a foreign employer—meeting clients, making introductions or otherwise carrying out duties in the UK—must operate a UK payroll. Even though your employer is based abroad, HMRC treats you as an employer in the UK.
You must register your employer with PAYE Online (DPNI scheme) and choose payroll software that calculates and reports Income Tax and National Insurance contributions (NICs) on every payday. You will calculate Class 1 employee and employers NICs on earnings above the secondary threshold (currently £175 per week). Each pay period, you submit a Full Payment Submission (FPS) to HMRC, showing pay, tax and NICs due. You then pay the collected sums to HMRC by the 22nd of the following month.
For UK residents with foreign employment but no UK-based clients or customers—such as those fully paid by overseas companies—their salary remains taxable in the UK under the worldwide basis of assessment. You declare your foreign salary, bonuses and allowances on a Self Assessment tax return. Tax treaties and the “183-day rule” may reduce UK liability: if you spend fewer than 183 days in a foreign country and your employer does not bear the cost of your UK presence, you might escape foreign tax and pay only in the UK.
Conversely, if you spend more than 183 days abroad, you could become a non-resident for UK purposes, meaning you pay UK tax only on UK-sourced income. In all cases, you claim double taxation relief by showing foreign tax paid and the treaty method—deduction or credit—on your Self-assessment.
Keep detailed records of overseas days, pay slips, and foreign tax certificates to avoid unexpected liabilities. Understanding employer PAYE duties and residence rules helps UK-domiciled individuals ensure accurate reporting and payment of tax and National Insurance Contributions (NICs).
Contact Our Specialist Tax Experts
Our team of UK tax accountants is ready to discuss your financial needs. Specializing in taxation, savings, investments, and accounting, we focus on maximizing your business potential. Schedule your consultation today via phone, video, or in-person. If your current accountant isn’t proactive, it may be time for a change.
