I am registered with HMRC in the UK as a sole trader for the 2014/15 tax year. During that year I worked for a Japanese company as an employee in Japan for a few months.
Looking at my payslips I have worked out I only paid about 3% tax on my Japanese income. (I'm assuming this is because I only worked for a few months and I was part time.)
When calculating the foreign tax credit relief it states
You claim either (whichever is smaller):
- the foreign tax paid (or allowed by treaty)
- the UK tax due
The amount of foreign tax paid is about 3% but the amount allowed by the treaty is 10% (Scroll down to Japan in this PDF to see the treaty allowance)
I take it I have to use 3% when calculating my tax relief or can I use 10%?