Tax Credits: Foreign income

Foreign income for tax credits means income arising in the tax year from a source outside the UK. It does not comprise foreign employment income, foreign trading income - which are taken into account as employment income and trading income respectively - or foreign chargeable event gains which are taken into account as investment income. It does include profits from property overseas, overseas investment, pension and social security income.

The losses of an overseas property business which can be carried forward against future profits of that business under ITA 2007, sections 118 and 119 are also taken into account in calculating foreign income.

The tax rules allowing foreign income to be taxed only to the extent that it is remitted to the UK does not apply to tax credits – all of a tax credit claimant’s worldwide income must be taken into account, even if it is exempt under the terms of a double taxation treaty.

The following are disregarded:

Also disregarded is any unremittable foreign income but this is taken into account in the main calculation rather than in the foreign income part.


Last reviewed/updated 1 July 2022