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Paragraph 20 Schedule 10 Finance Act 2025

UK residents who received dividends from foreign companies prior to 6 April 2016 were entitled to a dividend tax credit equal to one ninth of the grossed up dividend in certain circumstances (see RDRM31160). Former remittance basis users with unremitted foreign dividends from before 6 April 2016 that qualified for a dividend tax credit are entitled to claim the tax credit in the year the dividend is remitted to the UK.

However, where such foreign dividend income is designated under the TRF, any tax credit is not available to be claimed. Therefore, if an individual wishes to designate the pre-6 April 2016 foreign dividend income, they are not entitled to reduce the amount designated by reference to the notional tax credit, or reduce the TRF charge, or reduce their total Income Tax payable for the tax year of designation.Ìý

Example

Claudio is UK resident and a former remittance basis user. He has foreign dividend income of £90,000 from 2014-15, on which he would be entitled to a tax credit of £10,000 in the year the dividend is brought into charge.

Claudio decides to designate the £90,000 in his 2026-27 tax return. Claudio must designate the full £90,000 in his tax return and pay the TRF charge of £10,800 (12% of £90,000). He cannot reduce the amount designated to £80,000, nor can he reduce his TRF charge to £800. He is also not entitled to reduce his 2026-27 Income Tax bill by £10,000. This is the case whether Claudio also remits the £90,000 or just designates it.

Alternatively, Claudio could choose not to designate the dividend income and instead he could pay tax at the usual rate when he remits the income, at which time he can claim the tax credit.