If you invest in US stocks or holdings which contain US companies, then you’ll need to complete a W-8BEN form. Here we explain what the W-8BEN is, why you need to fill one in, and how most providers will walk you through this process so you can be compliant with tax regulations and get the most from your investments.
What is the W-8BEN?
Certificate of Foreign Status of Beneficial Owner for US Tax Withholding and Reporting
IRS – https://www.irs.gov/forms-pubs/about-form-w-8-ben
If you hold US stocks or investments either directly or via an ETF in a General Investment Account (GIA) or Individual Savings Account (ISA) then you should fill in a W-8BEN.
This form is a submission to the IRS – Internal Revenue Service, the USA’s equivalent of HMRC.
The W-8 series of forms enables foreign (to the USA) persons or entities to claim document status on certain taxes and charges. The W-8BEN is for individuals (e.g. personal investors) with foreign status. In the case of a UK investor, completing this form will lead to a reduction in taxes paid meaning better returns on investments.
Importance of the W-8BEN for UK Investors
Completing the W-8BEN means you do not suffer from double taxation.
The US government will tax you on any income you earn from shares as you are not a US resident or citizen.
A 30% Withholding Tax is applied by the US Government on dividends. Dividends are a form of income and hence are subject to tax. Just like you would report dividend income in the UK, the USA has similar tax rules. As a foreign investor into the US, your income from dividends is taxed in the US as well as the UK.
The UK has agreement with the USA. Completing the W-8BEN form allows UK investors to reduce the tax incurred on dividends from US holdings from 30% to 15%.
How to Complete a W-8BEN Form in the UK
Instructions for completing the W-8BEN form can be found on the IRS website.
If you are using a common trading platform in the UK, such as Trading212, InvestEngine, AJBell or Hargreaves Lansdown, then they will automatically help you through the process.
When you open your account, or when you buy a stock that requires completing a W-8BEN form, you’re be invited to fill out and submit the form via the platform. Often the form will be automatically generated based on the information you provided when you created your account. In this case all you need to do is add your electronic signature by typing your name in a box and hit submit.
The form itself only requires basic information about you including name and address. The foreign tax identifying number is simply your UK National Insurance Number.
When I opened my Trading212 Stocks and Shares ISA the form was filled out automatically as part of the account creation process. All I needed to do was check it was correct and hit OK.
The W-8BEN is valid until the last day of the calendar year in which it was signed, plus an additional 3 calendar years. Your stock broker will remind you to re-sign.
This is a legal document and hence we recommend reading through the form in its entirety before signing, even if it was automatically filled in for you.
