Digital Nomad
For Non-Residents & Digital Nomads: UK Dividend Rules Update & Notional Tax Credit Abolition
If you’re a non-UK resident receiving UK dividend income, the abolition of the notional tax credit from 6 April 2026 changes your tax calculation – here’s what to watch.
By NomadicTax Research Team • 5-8 min read • May 17, 2026
## What Changed on 6 April 2026
- The UK abolished the **notional tax credit** under **section 399 Income Tax (Trading and Other Income) Act 2005**. ([gov.uk](https://www.gov.uk/government/publications/abolition-of-the-dividend-tax-credit-for-non-uk-residents/abolition-of-the-notional-tax-credit-on-dividends-received-by-non-uk-residents?utm_source=openai))
- This notional credit previously allowed some **non-UK residents** who also had UK rental or partnership income to treated some of their dividend income as if they had already paid some tax at the Ordinary Rate. That advantage is no longer available. ([gov.uk](https://www.gov.uk/government/publications/abolition-of-the-dividend-tax-credit-for-non-uk-residents/abolition-of-the-notional-tax-credit-on-dividends-received-by-non-uk-residents?utm_source=openai))
- Impact applies only to **distributions received on or after 6 April 2026**. ([gov.uk](https://www.gov.uk/government/publications/abolition-of-the-dividend-tax-credit-for-non-uk-residents/abolition-of-the-notional-tax-credit-on-dividends-received-by-non-uk-residents?utm_source=openai))
## Who Is Affected
- **Non-UK resident individuals** with UK dividend income plus UK rental or partnership income.
- Fewer than **1,000 individuals per year** are estimated to be affected. ([gov.uk](https://www.gov.uk/government/publications/abolition-of-the-dividend-tax-credit-for-non-uk-residents/abolition-of-the-notional-tax-credit-on-dividends-received-by-non-uk-residents?utm_source=openai))
- If you receive only dividends, and no other UK income, or only dividends and no rental/partnership income, you may not be in scope.
## What You Need to Do
- Recompute your UK tax filings: when you have UK dividends and rental or partnership income, do not subtract a notional tax credit—the gross-up benefit has gone.
- If previously relied on section 399, identify all distributions received on or after 6 April 2026 and adjust accordingly.
- Continue to submit Self-Assessment returns as before; HMRC will adapt software and forms.
- Seek advice if you have mixed income or special tax treaty implications, as double tax relief or withholding tax may still apply.
## Example Scenarios
- **Example A**: Maria (non-UK resident) receives UK dividends and UK rental income. Pre-April 2026, she could use the notional credit to reduce her tax burden; now her dividend income above the allowance is taxed without that credit.
- **Example B**: Liam (non-UK resident) only receives UK dividends. Since no rental/partnership income, he was never eligible for the credit—so his situation does not change.
## Why This Matters for Digital Nomads & Non-Residents
- Tax-efficient structuring: remove expectations of certain tax credits; planning for residence periods and treaty-based relief becomes more crucial.
- Cash flow and withholding: without the credit, tax due may increase; ensure cash set aside accordingly.
- Residency status and income source planning becomes more meaningful: splitting income between years, managing UK-source vs foreign-source income.
## Action Steps
1. Review your income portfolio: identify if you have rental or partnership income in the UK alongside dividends.
2. Prepare for higher withholding or revisions in 2026-27 tax year if you had been relying on section 399 credit.
3. Coordinate with HMRC treaties or tax advisers to claim double taxation relief if applicable under your home country treaty.
4. Stay abreast of HMRC guidance regarding changes in IT systems/forms for non-resident dividend treatment.
## Big-Picture Implications
- Aligns treatment of non-UK residents more closely with UK residents—remove disparity or perceived unfair advantage.
- Expected **negligible fiscal impact** overall, though materially important for those few affected. ([gov.uk](https://www.gov.uk/government/publications/abolition-of-the-dividend-tax-credit-for-non-uk-residents/abolition-of-the-notional-tax-credit-on-dividends-received-by-non-uk-residents?utm_source=openai))
- A reminder that UK tax policy continues moving toward **fairness and simplification**, especially for cross-border income.