What’s changing?
- The UK government has announced that the notional tax credit on dividends for non-UK residents will be abolished. This change applies to individuals who receive UK dividend income and also have UK rental or partnership income. (gov.uk)
- It will come into effect for distributions on or after 6 April 2026. (gov.uk)
Why is this happening?
- Currently, non-UK residents get a tax credit to match a rate UK residents used to have. But since the UK removed the dividend tax credit for residents, non-residents retaining the credit is inconsistent. The change aims to level the playing field and remove an unfair advantage. (gov.uk)
- Government estimates fewer than 1,000 individuals will be affected annually. It notes that this change has negligible impact on tax revenue. (gov.uk)
Who will be affected?
- Non-UK resident individuals with UK dividend income and UK rental or partnership income. If you have only dividend income, or only rental/partnership income, this specifically targets the combination. (gov.uk)
- UK residents are unaffected. (gov.uk)
Practical implications
- These non-residents will no longer receive the notional tax credit when calculating UK tax due on UK dividends. That may increase your taxable income, depending on your situation.
- You still submit a Self Assessment return, but the element involving the credit will be removed, and related legislative references to section 399 will be repealed. (gov.uk)
Actionable steps
- Review your income sources: Do you receive both dividends and rental/partnership income from UK sources?
- Estimate the change: Calculate expected UK dividend income and model tax liabilities with and without the tax credit to see how much more tax you might owe starting April 2026.
- Seek tax advice: With multiple income streams cross-border, consulting a specialist in international personal tax matters will help you plan.
- Update your tax planning: If you were structuring your income expecting the tax credit, you may need to rethink investment and ownership structures or dividends timing prior to 6 April 2026.
Example scenario
Emma, based in France, owns UK rental property generating £12,000/year and holds shares paying £5,000 dividends annually. Under the old rules, for 3 years she benefited from a notional tax credit on the £5,000, reducing her UK tax bill. After 6 April 2026 she loses the tax credit and will pay UK tax on the full amount without that relief, increasing her tax due.
Bottom line: If you are a non-UK resident with these income sources, these changes could increase UK tax liabilities from April 2026. Now is the time to prepare and revise your cross-border income strategy.