What are the tax implications of holding US stocks in a UK self-select trading ISA?

Ordinarily I'd expect the UK-US tax treaty to cover any taxation issues, so that I'd pay the UK rates of tax. But presumably I won't pay zero tax, even in an ISA?

If so, is there any point in putting US shares in an ISA? Would I be better off if I used up my tax-free allowance at home?

2 Answers 2


"non-resident aliens" to the US do not pay capital gains on US products.

You pay tax in your home country if you have done a taxable event in your country.


but if you hold dividends, you are subject to US dividend tax. The UK-US treaty should touch on that though.

  • Thanks, it's good to know I'm not subject to US capital gains tax. It's not clear how much tax to expect on dividends though: for UK stocks they'd be free of tax, but I don't know whether the treaty recognises tax-free ISAs. Feb 15, 2012 at 10:20
  • UK-US tax treaty, page 12 (Article 10) treasury.gov/resource-center/tax-policy/treaties/Documents/… - 5% if you are a company, 15% if you are an individual
    – CQM
    Feb 16, 2012 at 0:07

See my answer here What is the dividend tax rate for UK stock

The only tax from US stocks you'd need to worry about would be dividend withholding tax of 30%. If you contact your ISA provider they should be able to provide you with a W8-BEN form so that you can have this rate reduced to 15%. Just because there's a tax treaty does not mean you will automatically be charged 15% - you must provide a W8-BEN form and renew it when it expires.

That last 15% is unfortunately unavoidable. If you were paying any UK taxes you could claim that 15% as a discount against your UK dividend tax liability, but as your US stock would be wrapped in an ISA there's no UK tax to pay which means no tax to reclaim from the tax treaty.

Other than DWT though, you will pay absolutely no tax on US stocks held in an ISA to either the US or UK government.

  • I bit late to the conversation, but anyway... do you need to 15%/30% tax when selling (re-balancing) the shares as well ?
    – MMT
    Nov 16, 2018 at 14:03

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