Tax on US shares

Our AJ Bell ISA and Pension accounts shelter your investments from UK income and capital gains tax. But if you want to buy overseas stocks and shares, there can be non-UK taxes to consider. If you’re thinking of investing in companies based in the United States through your AJ Bell accounts, here’s what you need to know about US withholding tax.

Non-US residents and citizens must pay tax on income received from US shares. This is known as withholding tax.

Thanks to a tax treaty between the UK and the US, the rate of US withholding tax on qualifying dividends and interest can be halved for UK-based investors, and in some cases reduced to 0%.

What is the rate of US withholding tax?

The main rate of US withholding tax is 30%, and this could apply to income you receive from US investments, even in a tax wrapper (like an ISA), where investments are exempt from UK taxes.

The US-UK tax treaty lets you complete an official form to lower the rate of US withholding tax. It’s known as a W-8BEN form and once completed, it’s usually valid for up to three years.

As well as allowing you to deal in US shares, this form lets you benefit from the US-UK treaty rates, which lowers the withholding tax for qualifying US dividends and interest from 30% to 15% for ISA and Dealing accounts.

An individual W-8BEN form is not required for US investments held in an AJ Bell Self-invested personal pension (SIPP), as the IRS recognises our SIPP as a qualifying pension scheme. This means all qualifying US dividends and interest are automatically paid to you free of any withholding tax.

Trustees of other pension schemes can also benefit from reduced rates of withholding tax when they invest through AJ Bell, using the W-8BEN entity form.

How do I complete a W-8BEN form for my AJ Bell account?

If you’re looking to buy US investments in one of our ISAs or Dealing accounts, you can usually complete a W-8BEN form online. Just log into your AJ Bell account and click 'Update my details' from the 'My account' menu to find it.

If you manage a Junior account or having a joint Dealing account, you'll need to complete our offline W-8BEN form. We’ve got W-8BEN guidelines to help you complete it correctly.

A form is not required to buy and sell US investments in your AJ Bell SIPP, or to benefit from the 0% withholding tax rate for qualifying pension schemes.