Whether you’re a UK expat returning home, living abroad with UK investments, or a UK resident investor, understanding how your investment income is taxed is crucial. At Harrison Brook, we help clients structure their portfolios for long-term, tax-efficient growth — making use of available allowances, wrappers, and planning opportunities. While we do not provide tax advice, we work alongside trusted tax professionals to ensure your investment strategy complements your overall tax situation.
Types of Investment Income and How They Are Taxed
1. Dividends
Dividend income from UK and foreign shares is subject to UK tax if you’re a UK tax resident. As of the 2025/26 tax year:
- The dividend allowance is £500
- Dividends above this are taxed at:
- 8.75% (basic rate)
- 33.75% (higher rate)
- 39.35% (additional rate)
We help clients use tax wrappers like ISAs and pensions to shield dividend income from tax where possible.
2. Interest from Savings and Bonds
Interest from savings accounts, corporate bonds, and other fixed-income products may be taxable depending on your total income and use of the:
- Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate)
- Starting Rate for Savings (up to £5,000 for low earners)
Structuring interest-producing assets into tax-efficient accounts is central to our financial planning approach.
3. Capital Gains
Profits made from selling investments such as shares, funds, or property may be liable for Capital Gains Tax (CGT). In 2025/26:
- Annual CGT exemption is £3,000
- Gains above this are taxed at:
- 10% for basic rate
- 20% for higher/additional rate (or 18%/28% for residential property)
We help manage asset sales strategically to minimise tax exposure over time.
Investment Wrappers and Planning Tools
ISAs (Individual Savings Accounts)
All income and gains within ISAs are tax-free. We advise UK residents to maximise ISA allowances annually.
Pensions (e.g., SIPPs)
Investment growth in pensions is tax-deferred. Contributions attract tax relief, and withdrawals can be planned strategically to reduce overall tax.
Offshore Bonds
Particularly relevant for expats and internationally mobile clients, offshore bonds offer tax deferral and flexible access, but need careful planning.
UK Residency and Overseas Investments
If you’re returning to the UK or becoming UK tax resident, you may need to report and pay tax on foreign investment income. The remittance basis may apply for non-domiciled individuals, but comes with caveats and potential charges. We’ll coordinate your investment planning with specialist tax advice to avoid unexpected liabilities.
How We Help
- Review and rebalance portfolios for tax efficiency
- Use allowances and tax wrappers strategically
- Time disposals to manage CGT exposure
- Work in tandem with tax professionals for complex cross-border investment planning
FAQs
1. Do I have to pay UK tax on foreign investment income?
If you’re UK tax resident, yes — unless you’re non-domiciled and claim the remittance basis (if eligible).
2. What’s the most tax-efficient way to invest in the UK?
ISAs and pensions are top options. Offshore bonds can also suit expats. We tailor strategies to your situation.
3. What is the dividend allowance for 2025/26?
£500. Dividends above this are taxed depending on your income tax band.
4. Can I offset investment losses against gains?
Yes, capital losses can be used to offset gains, reducing your CGT bill.
5. Can you help me avoid tax on my investments?
We don’t offer tax evasion schemes, but we help structure investments tax efficiently and refer you to qualified tax advisers when needed.
