Don't pay twice: an introduction to Tax Treaties

Published 18th February 2019; Updated April 2021

Relief for UK tax paid - an introduction to Tax Treaties and Double Taxation Conventions and how they can help you

The UK has entered into a Tax Treaty with over 130 countries. The Tax Treaty between the UK and another country gives us guidance as to which country has first taxing rights, and what relief you may get in your own country for tax paid in the UK. Most tax treaties follow the OECD model, but often with small amendments.

The treaties always start by saying to whom they apply. They all apply to individuals but often not to trusts. We shall consider individuals only:

  • The treaties then list the taxes they apply to and Income Tax and Capital Gains Tax are always included.
  • The UK always has first taxing rights on income and gains from Land and Buildings situated in the UK. An individual will pay UK income tax on the profit made from UK land or buildings, no matter where he or she lives.
  • The UK generally excludes dividends and interest from calculations of income tax where the recipient is non-resident - but they are usually taxable in his/her own country.
  • UK pensions paid to non-residents are usually taxable in the country of residence and not in the UK.
  • In most Tax Treaties the section dealing with the elimination of Double Taxation says that if income is taxable in both the UK and in your country, then the tax you pay in your country on the same income may be reduced by the tax you have paid in the UK on the same income, but if the tax you have paid in the UK is more than the tax in your own country then you do not get the excess refunded.
  • If you pay no tax in your own country on your UK income from UK Land and Buildings then you get no relief for tax paid in the UK.
  • There are 195 countries in the world, and the UK has a Tax Treaty with about 130. If you live in a country with which the UK does not have a tax treaty you will almost certainly pay tax on your UK income in both countries.