Do I Get Taxed On US Dividends – Withholding Tax

Do I Get Taxed On US Dividends – Withholding Tax

Many a new investor are a little shocked in the UK when they get their first dividend payment from a US source. Not because of the fluctuations in the USD to GBP exchange rate…

We are hit with a withholding tax in the UK on the dividends from US stocks. Currently, this tax is 15% although it can be as high as 30%.

To make sure you are ‘only’ getting taxed at a lower rate of 15% you must fill in a W-8BEN form. My broker Trading 212 made me fill one in when I opened the account.

If you have not filled one in, make it your priority to do so.

Getting hit with a 15% tax is bad enough, do not make the same mistake many do and continue getting hit with a 30% tax.

The W-8BEN is a very simple form to fill out and requires no knowledge of taxation or anything. Simply tick a few boxes and you are away. Hopefully, your broker will force you to fill one in as Trading 212 does.

Fortunately, the form can be filled out digitally at least if your broker makes you will one out.

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Dividend Tax Inside An ISA

Do I still get taxed 15% inside my stocks and shares ISA is normally the next question…

Yes, on US stock you will always be taxed on the dividends. On your UK stocks fear not your ISA is tax-free for both capital gains and dividends.

To see why you should have a stocks and shares ISA check out Trading 212 Invest vs ISA.

However, do not let the 15% tax put you off investing in the US economy, it will be your downfall if you do. Even more so if you choose to adopt a dividend growth portfolio strategy like me.

Many UK companies are not as committed to dividend payments in the same way that US companies are. The criteria are different for dividend kings and aristocrats in the UK vs the US, in that they are nowhere near as strict. I shall do a separate post for US vs UK aristocrats.

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None of the above should be used as financial advice, I am not a professional. Always do your own research.



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