A UK resident who is not a US person gives Form W-8BEN to the platform or broker that holds their US shares. The form certifies foreign status and claims the US-UK treaty, so US tax withheld from dividends generally falls from 30% to 15%. The UK then taxes the dividend in full and gives credit for the US tax, up to the treaty rate.
This post is for British nationals and other non-US people living in the UK who buy US shares through a UK platform. It goes further than the section of our guide to avoiding US-UK double taxation on UK residents with US income. It covers the withholding rates, who must not sign, how long the form lasts, the UK credit claim, a worked example and US estate tax on US shares.
What does Form W-8BEN do for a UK investor?
It tells the business that receives your US dividends that you are not a US person and that you live in the UK. That allows the payer to withhold US tax at the treaty rate rather than the default rate, and it records you as a non-US account holder for the payer's own reporting duties.
Form W-8BEN (opens the official IRS page in a new tab) is a certificate of foreign status for individuals. The IRS instructions describe it as the form for a nonresident alien who is the beneficial owner of income subject to US withholding, or who holds an account with a foreign financial institution. Part II carries the treaty claim, naming the United Kingdom as your country of residence. Our page on Form W-8BEN explains each line in turn.
The form is never sent to the IRS. The instructions say it goes to the person who asks for it, which for a share investor is the platform, broker or custodian receiving dividends on your behalf. It also asks for a tax identification number from your country of residence, which the instructions generally require where your income is reported to the IRS on Form 1042-S. A US number such as an ITIN is not needed to claim the treaty rate on dividends from actively traded shares.
How much US tax is withheld on dividends without a W-8BEN?
The default rate on US-source dividends paid to a foreign person is 30% of the gross dividend. With a valid W-8BEN claiming UK residence, the US-UK treaty generally limits it to 15% for an individual. The tax is deducted before the dividend reaches your account.
The IRS instructions state that foreign persons are taxed at 30% on certain US-source income, collected by withholding on the gross payment, and that a payer holding no valid form may withhold at that rate. The cap comes from Article 10 of the US-UK income tax treaty (opens the official IRS page in a new tab): where a UK resident beneficially owns the dividends, US tax may not exceed 15% of the gross amount. Our page on the US-UK tax treaty sets out the other articles.
The treaty rate limits US tax only. The dividend remains taxable in the UK, as GOV.UK guidance on tax on foreign income (opens the official GOV.UK page in a new tab) says for UK residents. With a valid form, the US tax is credited against the UK charge, so the total is roughly the UK rate. Without one, the withholding above the treaty rate cannot be credited in the UK and is recoverable only from the IRS, so the investor pays more in total.
- No form, or an expired one. Withholding at 30% on the gross dividend
- Valid W-8BEN claiming UK residence. Withholding generally limited to 15%
- Dividends from a US real estate investment trust. Treaty rate only for an individual with a small interest in the trust
- Interest on US bonds and deposits. Generally taxable only in the UK under Article 11
- Gains on selling US shares. Generally taxable only in the UK under Article 13, with exceptions
Who must not sign a W-8BEN?
Anyone who is a US person for tax purposes. That means every US citizen, wherever they live, and every green card holder or other resident alien. They certify their status on Form W-9 instead. A dual British and US national is in the first group, even one who has never lived in America.
The W-8BEN instructions (opens the official IRS page in a new tab) say plainly that a US citizen should not use the form even if living outside the United States, and that US persons, including resident aliens, give Form W-9. A green card holder is a resident alien under the green card test (opens the official IRS page in a new tab) until that status is formally ended, so living in Britain does not on its own make the form available. The signature on a W-8BEN is a certification, under penalties of perjury, that the signer is not a US person.
For a US person the treaty withholding rate does not help in any case, because the dividend is taxed on the US return and UK tax is credited there. A UK bank or platform that sees signs of US status will ask about it, and our post on what a FATCA letter from a UK bank means explains those requests. US citizens in Britain holding US shares should read our post on re-sourcing US dividends under Article 24, which covers how relief works for them.
How long does a W-8BEN last, and when must it be replaced?
Generally until the end of the third calendar year after signing, counting from the date you sign it. A change in circumstances that makes any information on the form incorrect ends its usefulness sooner, and the instructions require you to tell the platform promptly and give it a new form.
In practice the expiry date is the one to watch. Platforms usually send a renewal request as expiry approaches. If the form lapses, the payer no longer holds valid documentation of your foreign status and may withhold at the default 30% from the next dividend, with no adjustment on the UK side for the excess.
The instructions give moving to the United States, or becoming a US citizen or resident alien, as examples of a change in circumstances. A Briton who spends long periods in America should keep an eye on the substantial presence test (opens the official IRS page in a new tab), which can make someone US resident for tax without any change of visa. A W-9 then replaces the W-8BEN.
- Moving to the United States or becoming US tax resident
- Becoming a US citizen or obtaining a green card
- Leaving the UK to live in another country, which changes the treaty claimed
- A change of name, permanent address or tax identification number shown on the form
How do you claim the US tax as a credit on your UK return?
Report the gross US dividend on the foreign pages of your Self Assessment return and claim Foreign Tax Credit Relief for the US tax withheld. The credit is the lowest of three figures: the US tax actually paid, the amount the treaty allows, and the UK tax due on that dividend.
GOV.UK guidance on being taxed twice (opens the official GOV.UK page in a new tab) says relief is usually claimed when you report the overseas income, and that you may get back less than the full foreign tax where a treaty sets a smaller amount or the UK rate on that income is lower. The figures go on the SA106 foreign pages (opens the official HMRC page in a new tab). HMRC's helpsheet HS263 sets out a working sheet for the calculation, treats each foreign dividend as a separate item, and offers deduction relief as an alternative where it gives a better result.
Two consequences follow. US tax withheld above the treaty rate is not creditable in the UK, and HMRC points to the foreign tax authority for any excess; for US withholding that usually means a Form 1040-NR refund claim. And where no UK tax is due on a dividend, for example because it falls within the allowances described in HMRC's guidance on tax on dividends (opens the official GOV.UK page in a new tab), there is no UK tax for the US tax to be credited against. Our UK Self Assessment service prepares these claims.
- Each US dividend in sterling, gross of US tax
- The US tax withheld from each payment, taken from the platform's tax statement
- The rate of withholding applied, to confirm the treaty rate was used
- The dates of any period when the W-8BEN had lapsed
What does this look like for a British investor in Bristol?
Take a British national employed in Bristol who has never held US citizenship or a green card, with US-listed shares in a general investment account on a UK platform. She signs a W-8BEN when opening the account, and her US dividends arrive with tax withheld at 15%.
Her dividends from all sources are more than her allowances cover, so she files a Self Assessment return. She enters each US dividend gross on SA106, with the US tax beside it. As a higher-rate taxpayer, her UK tax on each dividend exceeds the US tax, so the full 15% is credited and she pays the balance to HMRC. The dividend ends up taxed at her UK dividend rate, shared between the two countries.
Some years later her form lapses unnoticed. The next dividends are withheld at 30%. On her UK return she can credit only the treaty rate, and the excess gives no UK relief. She renews the form so later payments return to the treaty rate, then weighs whether the excess on the affected dividends justifies a US non-resident return to reclaim it. Our treaty relief service looks at that trade-off with her.
Can US shares create a US estate tax bill for a UK resident?
They can. For someone who is neither a US citizen nor US-domiciled, shares in US corporations are US-situs property for estate tax, wherever the shares are held. If US-situs assets at death exceed a low filing threshold, the executor must file a US estate tax return, though the US-UK estate tax treaty may limit the tax.
The IRS page on estate tax for nonresidents not citizens (opens the official IRS page in a new tab) says the executor must file Form 706-NA where US-situated assets, with certain lifetime gifts added back, exceed $60,000, a threshold that is not indexed for inflation. The Form 706-NA instructions add that stock issued by a US corporation is located in the United States wherever the certificates are kept, while stock of a corporation organised outside the United States is treated as located outside it.
A UK national can also look to the separate US-UK estate and gift tax treaty. The Form 706-NA instructions describe a provision that caps US estate tax on such property by reference to the tax the US could have charged on the whole worldwide estate, claimed with an alternate computation attached to the return. Whether that helps depends on the size of the estate, and UK inheritance tax runs alongside it. Our estate and trust planning service reviews both, and the guide to avoiding US-UK double taxation shows where dividends fit among the other kinds of income.
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
