Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Withholding tax definition

What does Withholding tax mean? Withholding tax is tax deducted at source from certain payments—commonly dividends, interest and royalties—often where the payee is non‑resident. It is a descriptive term used across tax practice; specific obligations and rates are set by statute and treaty (for the UK, principally the Income Tax Act 2007; for Ireland, the Taxes Consolidation Act 1997) and by double taxation agreements. United Kingdom (England & Wales, Scotland and Northern Ireland): withholding typically applies at 20% to interest and royalties, subject to domestic exemptions and treaty relief. The UK generally does not impose withholding on dividends, save for certain distributions (for example, REIT property...

UK withholding tax on yearly interest: meaning, UK source determination, key cases, exemptions, guarantee payments, alternative finance, and practical implications; rate changes from April 2026–27

Published by a LexisNexis Tax expert

Practice notes

FORTHCOMING CHANGE relating to from 6 April 2026 and from 6 April 2027 :

Finance Bill 2026 (FB 2026) introduces an amendment to ITA 2007, s 874, substituting the wording ‘the basic rate’ with ‘the savings basic rate’. Consequently, from 6 April 2026, payers of UK source yearly interest will be obliged to deduct a sum equal to income tax charged at the savings basic rate from those payments. For the 2026–27 tax year, the savings basic rate stands at 20%. Under FB 2026, this rate is set to rise to 22% with effect from 6 April 2027. As a result, from 6 April 2027, the income tax to be deducted from a UK source yearly interest payment will be calculated at 22%. In short, the deduction applicable to UK source yearly interest will be 20% for 2026–27, increasing to 22% for payments made on or after 6 April 2027...

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Web page updated on 22/05/2026

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