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 loan interest: yearly interest, UK source and key exemptions (banking and UK non‑bank lenders, quoted Eurobond, DTT/DTTP, qualifying private placements)

Published by a LexisNexis Banking & Finance expert

Practice notes

Across numerous jurisdictions, including the United Kingdom, borrowers may, in certain situations, be required to deduct a portion of interest owed to a lender and pay the deducted sum to the tax authorities. This Practice Note outlines when UK withholding tax applies to lending and highlights the principal exemptions. For fuller detail on the handling of withholding tax in facility agreements, see Practice Note: Tax considerations on a loan agreement—the tax gross up clause and Reviewing a loan with a view to alleviating UK withholding tax risk—checklist.

What is withholding tax?

Withholding tax is a means of collecting tax at source from the person making the payment, rather than from the recipient. It offers an efficient collection mechanism for authorities such as His Majesty's Revenue and Customs (HMRC), as the payer carries the administrative burden of:

deducting the correct amount of income tax from the payment; and
accounting to HMRC for that tax

Withholding tax on interest payments

UK withholding tax—when is it applicable?

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Web page updated on 21/05/2026

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