The US-UK income tax treaty

By Brent Chudoba, editor Updated September 15, 2026

Under the US-UK income tax treaty, the most the paying country can withhold from an ordinary investor is 15% on dividends, 0% on interest and 0% on royalties. Some recipients and some kinds of payment get a different rate, and the table below lists each one. Without a treaty, US-source dividends and royalties paid to a nonresident are withheld at 30%, while the tax code already exempts most portfolio and bank-deposit interest whether or not a treaty applies.

The treaty has generally applied since 2004. It also decides residency when both countries claim you, and assigns who taxes pensions and Social Security. It does not generally stop the US taxing its own citizens.

What are the US-UK treaty withholding rates?

US-UK treaty withholding rates and who qualifies
Income	Rate cap	Who gets this rate, and where the treaty says so
Dividends	15%	Anyone not in a category below, including an ordinary individual investor (Article 10(2)(b))
Dividends	5%	a company that owns shares carrying at least 10% of the voting power of the paying company, directly or indirectly (Article 10(2)(a))
Dividends	0%	a company that has owned shares carrying 80% or more of the voting power of the paying company for the 12 months ending on the date the dividend is declared, and that also either owned at least 80% (directly or indirectly) before 1 October 1998, meets the listed-company test in Article 23(2)(c), or is entitled to benefits for the dividend under Article 23(3) or 23(6) (Article 10(3)(a))
Dividends	0%	a pension scheme resident in the other country, as long as the dividends do not come from a business the scheme carries on, directly or indirectly (Article 10(3)(b))
Interest	0%	Anyone not in a category below, including an ordinary individual investor (Article 11(1))
Interest	15%	contingent interest: interest figured by reference to the payer's or a related person's receipts, sales, income, profits or cash flow, a change in the value of their property, or a dividend or distribution paid to a related person (Article 11(5)(a))
Royalties	0%	Everyone, including an ordinary individual investor (Article 12(1))

The cap applies to income paid from one country to a resident of the other, and each treaty conditions it on that resident being the real recipient rather than a conduit; the article cited beside each rate is the one that sets the condition. Which document sets each rate today: dividends, 2001 convention, Article 10(2) and 10(3); the 2002 protocol replaced Article 10(4) (investment funds and REITs) but did not change the 15%, 5% or 0% rates; interest, 2001 convention, Article 11; not amended by the 2002 protocol; royalties, 2001 convention, Article 12; not amended by the 2002 protocol.

What else changes the rate?

These are edge cases. If you hold ordinary shares, bonds or a copyright, skip to the next section.

Dividends: Dividends from a pooled investment vehicle, such as a US regulated investment company or REIT, never get the 5% rate or the 80% subsidiary 0% rate. A vehicle holding mainly shares, securities or currencies can pay at 15%, or 0% to a pension scheme. For other vehicles, such as a REIT, the 15% rate applies only if the owner is an individual holding not more than 10%, holds not more than 5% of a publicly traded class, or holds not more than 10% of a diversified vehicle, and a pension scheme gets 0% if it holds not more than 10% (10(4) as replaced by the 2002 protocol). The branch profits tax is capped at 5% (10(7) and 10(8)), and no treaty rate applies to a dividend paid under a conduit arrangement (10(9)). The article works the same way in both directions.

Interest: Interest is taxable only in the country where the owner lives, apart from the contingent interest tier. Interest is not contingent merely because the rate steps down as the payer's figures improve or up as they worsen (11(5)(b)). Interest on an ownership interest in a mortgage or asset securitisation vehicle, to the extent it exceeds the return on comparable debt, may be taxed under domestic law (11(6)). Interest tied to a permanent establishment in the paying country is taxed as business profits (11(3)), and no treaty rate applies under a conduit arrangement (11(7)). The article works the same way in both directions.

Royalties: Royalties are taxable only in the country where the owner lives. They include a gain on selling a covered right or property to the extent the gain depends on its productivity, use or disposition (12(2)(b)). Royalties tied to a permanent establishment in the paying country are taxed as business profits (12(3)), and no treaty rate applies under a conduit arrangement (12(5)). The article works the same way in both directions.

Which country are you a resident of under the US-UK treaty?

If the US and the United Kingdom both treat you as a resident under their own laws, Article 4(4) decides. It works through these tests in order, and stops at the first one that points to a single country:

Where you have a permanent home available to you
If you have a permanent home in both countries, where your personal and economic ties are closer (your centre of vital interests)
If that centre cannot be determined, or you have no permanent home in either country, where you have a habitual abode
If you have a habitual abode in both countries or in neither, the country you are a national of
If you are a national of both countries or of neither, the two tax authorities try to settle it by mutual agreement

Using the tie-breaker to be treated as a resident of the United Kingdom has US consequences: you file Form 1040-NR with Form 8833 attached, and a green card holder of 8 of the last 15 years who makes the claim is treated as having ended US residency. The details are on the hub page.

How does the US-UK treaty tax pensions and Social Security?

Pensions (Article 17(1) and 17(2)). A pension from a pension scheme is taxable only in the country where the recipient lives (17(1)(a)), but that country must exempt any part that would be tax-free to a resident of the country where the scheme is set up, which the Treasury technical explanation illustrates with a Roth IRA distribution (17(1)(b)); a lump sum from a pension scheme is taxable only in the country where the scheme is set up (17(2)). The saving clause still lets the US tax a US citizen living in the UK on a pension and a lump sum, although under 17(1)(b) the technical explanation says such a citizen is taxed by the US only on the part of a UK scheme pension that is taxable in the UK; government-service pensions follow Article 19(2) instead.

Social Security (Article 17(3)). Social security benefits paid by one country to a resident of the other are taxable only in the country where the recipient lives, and the Treasury technical explanation says this covers US Tier 1 Railroad Retirement. Because 17(3) is an exception to the saving clause, a US citizen who is a UK resident under the treaty is not taxed by the US on US Social Security.

Does the treaty stop the US taxing its own citizens?

Generally no. The saving clause (Article 1(4)) keeps that right. Each country may tax its own residents (as decided under Article 4) and its own citizens as if the treaty did not exist, and a former citizen or long-term resident who gave up that status with tax avoidance as one of the principal purposes is treated as a citizen for 10 years, on income from that country's sources only (1(6)).

The exceptions: Under Article 1(5) as replaced by the 2002 protocol, everyone keeps the benefits of Articles 9(2), 17(1)(b), 17(3), 17(5), 18(1), 18(5), 24, 25 and 26, and people who are neither citizens nor green-card holders of the taxing country also keep Articles 18(2), 19, 20, 20A and 28.

What does the treaty say about students?

Article 20. A student in full-time education at a university, college or similar recognised institution, or a business apprentice in full-time training (apprentices for one year at most), who is or was just before arriving a resident of the other country, is not taxed by the host country on payments from outside the host country for maintenance, education or training. Article 20A, added by the 2002 protocol, separately exempts a visiting professor or teacher's pay for teaching or public-interest research for up to two years; neither article protects someone from the country where they are a citizen or green-card holder.

What do people most often get wrong about this treaty?

The saving clause is the trap. The US still taxes a US citizen living in the UK on a UK pension and a UK pension lump sum as if the treaty did not exist, because only 17(1)(b), 17(3) and 17(5) of that article are carved out; the Treasury technical explanation reads the 17(1)(b) carve-out as limiting US tax to the part of a UK scheme pension that is taxable in the UK, and 17(3) keeps US Social Security taxable only by the UK for a treaty UK resident. A lump sum from a pension scheme is not treated like a regular pension: it is taxable only in the country where the scheme is set up (17(2)). Article 18 separately lets the country of residence wait to tax a foreign scheme's investment income until it is paid out (18(1)), lets someone already in a scheme before moving to work in the other country deduct contributions there, capped at local relief and subject to the tax authority agreeing the scheme corresponds (18(2) to 18(4)), and lets a US citizen working in the UK for a UK employer deduct or exclude UK scheme contributions on the US return, capped at what a corresponding US plan would allow (18(5)). Before the tie-breaker, Article 4(2) says a US citizen or green-card holder counts as a US resident for the treaty only with a substantial presence, permanent home or habitual abode in the US, and only if not a resident of a third country under that country's treaty with the UK. On dividends, 15% is the rate for individuals; 5% and 0% need corporate ownership or pension-scheme status.

How do you claim the treaty rate?

Give the US payer Form W-8BEN naming the United Kingdom as your country of residence, before the payment. Many countries ask a US resident for Form 6166, a US residency certificate requested on Form 8802, before they apply the lower rate on their side. Both, with the fees and who can get them, are covered on US tax treaties by country.

Sources

Every rate and article on this page was read in the treaty text and its protocols, then checked a second time by a separate review of the same documents, on September 15, 2026.