What is withholding tax and when is it levied?
Withholding tax is levied by foreign tax authorities on dividend payments, royalties and interest A proportion of the tax can be reclaimed and refunded under a Double Tax Treaty between the country of the income and the country of the beneficiary – typically reducing the tax to an effective rate of 15%.
What does withholding tax stand for?
Withholding tax, or a retention tax, is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. In most jurisdictions, withholding tax applies to employment income.
What percentage of taxes should I withhold?
To keep your withholding the same as last year, choose a withholding percentage of 1.8% (40,000 x .018 = 720) and withhold an additional $10.77 per biweekly pay period (1,000 - 720 = 280 / 26 = 10.77). Be sure to take into account any amount already withheld for this year.
UNITED STATES-UNITED KINGDOM INCOME TAX CONVENTION