Tax on US stocks as a UK investor - Stocks - Forums (2024)

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Tax on US stocks as a UK investor - Stocks - Forums? ›

The only taxes that you will pay to the USA is the 15% foreign tax withholding on share dividends deducted at source (Limited Partership shares are taxed differently) which can be credited against your UK tax liability.

UK residents aren't subject to paying tax on US shares from the UK, but they do have to pay a tax on any dividends or income received from those US stocks. This tax is called a withholding tax (WHT) and it's 15%. Any dividends or income received from US stocks must receive this WHT 15% tax.

You get one huge advantage as a foreign investor in US stocks: you don't pay capital gains tax to the US authorities. [^1] It doesn't matter if you're holding US stocks, or stocks of international companies listed in the US.

If you want to buy US shares and you are not a US citizen or resident, the US government will charge you a tax on any income you earn from those shares. This is where a W-8BEN form comes in.

Can I invest in the S&P 500 from the UK? Yes, you can invest in the S&P 500 but you can't invest directly in the index. However, you can buy stocks and shares in the companies listed in the S&P 500.

UK residents have to declare foreign Capital Gains to HMRC, so you should enter the relevant details in the Capital Gains pages (SA108) of your Self Assessment tax return. Foreign Tax Credit Relief can be claimed (in the Foreign pages/SA106) on the actual amount of US tax you eventually pay on the transaction.

If your total UK and foreign dividends amount to less than the £2000 threshold, then there is no UK tax to pay on the dividends. No relief would be due for the USA tax paid, as there is no tax to pay in the UK, because there is no double taxation in place.

Foreign Earned Income Exclusion

Expats can use the Foreign Earned Income Exclusion (FEIE) to exclude a certain amount of foreign income from US taxation. The maximum exclusion amount changes each year. For the 2023 tax year, the FEIE exclusion limit is $120,000 and will increase to $126,500 for the 2024 tax year.

Under the Treaty, there is a special exemption from U.S. withholding tax on interest and dividend income that you earn from U.S. investments through a trust set up exclusively for the purpose of providing retirement income. These trusts include RRSPs, RRIFs, LIRAs, LIFs, LRIFs and Prescribed RRIFs.

Foreign stock or securities, if you hold them outside of a financial account, must be reported on Form 8938, provided the value of your specified foreign financial assets is greater than the reporting threshold that applies to you.

Can a UK investor buy a US ETF? ›

You can buy shares in US-listed companies from the UK, but due to local and European regulations, you're not allowed to purchase US-listed exchange-traded funds (ETFs) in the UK.

There will be no UK capital gains tax or income tax on the proceeds from foreign stocks held within an ISA or SIPP. Your only tax loss will be any withholding tax (WHT) deducted at source in the country where the stock is listed. Note that you cannot avoid the WHT by using an ISA.

The US is the more exciting and competitive market. But that's not the same as growth for investors being guaranteed. The more favourable regulatory environment and sheer size of the US exchanges make it more of a hotbed for many diverse companies. Younger, high-octane companies can mean higher rewards.

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction. If you buy: shares electronically, you'll pay Stamp Duty Reserve Tax ( SDRT )

ISAs are very common in the UK, as no further UK tax is due on the income generated in an ISA and they are free of capital gains tax. However, they can be very problematic for US citizens or Green Card Holders. When ISAs become problematic for US citizens or Green Card Holders depends on the type of ISA.

You can hold foreign stocks and shares in a share ISA, as long as they are listed on a recognised stock exchange. There is a list of investments that ISAs may purchase at: Stocks and Shares investments for ISA managers.

This is because the US taxes its citizens on their worldwide income, regardless of where they live, and the UK taxes individuals on the income they earn while residing in the UK. The treaty provides relief from this double taxation by allowing individuals to claim a credit for taxes paid in the other country.

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction. If you buy: shares electronically, you'll pay Stamp Duty Reserve Tax ( SDRT ) shares using a stock transfer form, you'll pay Stamp Duty if the transaction is over £1,000.

Nonresident aliens are subject to a dividend tax rate of 30% on dividends paid out by U.S. companies. If you are a resident alien and hold a green card—or satisfy resident rules—you are subject to the same tax rules as a U.S. citizen.