Form SA106 is the supplementary schedule to the UK Self Assessment tax return used by UK tax residents to declare worldwide income and foreign capital gains under the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).
Under UK law, individuals resident in the UK on the arising basis are taxable on their worldwide income and gains, regardless of whether that money is remitted (brought into) the United Kingdom.
Income Categories Reported on Form SA106
Form SA106 covers multiple distinct streams of cross-border income:
- Foreign Dividends (Page F2): Dividends paid by companies registered outside the UK (e.g. US equities held through trading platforms, European dividend shares). Foreign withholding taxes deducted at source must be documented.
- Foreign Savings & Interest (Page F2): Interest received from overseas bank accounts, fixed deposits, foreign government bonds, or offshore loans.
- Overseas Pensions & Social Security (Page F3): State or occupational pensions received from overseas jurisdictions, including treaties exempting government service pensions.
- Overseas Property Income (Page F4–F5): Rental income from holiday homes, buy-to-let properties, or land located outside the United Kingdom.
- Foreign Capital Gains (Page F6): Disposals of foreign real estate or offshore assets that are subject to Capital Gains Tax alongside Form SA108.
Double Taxation Relief & Foreign Tax Credit Relief (FTCR)
When foreign income is taxed both in the country of origin and in the United Kingdom, the taxpayer may claim Double Taxation Relief under the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010).
Relief is claimed in one of two ways:
- Foreign Tax Credit Relief (FTCR): The foreign tax paid is credited directly against your UK income tax bill on that specific source of income. Under Section 36 TIOPA 2010, the credit is limited to the lower of the foreign tax actually suffered or the UK tax payable on that same income slice.
- Deduction Basis: If no Double Taxation Treaty exists or FTCR cannot be claimed, the foreign tax suffered can be deducted as an allowable expense against gross foreign income, reducing taxable profit rather than giving a pound-for-pound tax credit.
Foreign Property Income vs UK Property
Foreign rental income must be kept strictly segregated from domestic UK property income:
- UK Property: Reported on Form SA105, where mortgage interest is restricted to a 20% basic rate tax reducer under Section 24 rules.
- Foreign Property: Reported on Form SA106 (Boxes 14 to 24). All overseas property businesses are treated as a single overseas property business, distinct from UK property.
- Ring-Fenced Losses: Losses incurred on foreign rental properties cannot be offset against UK property profits or general UK income; they must be carried forward against future profits of the same foreign property business.