I received a Form 1042-S showing U.S. tax was withheld on my income. How do I get a refund?

You are correct that the U.S.-UK income tax treaty generally reduces the withholding rate on dividends from 30% to 15% (or even 0% for certain pension funds and qualifying dividends from substantial shareholdings). If 30% was withheld and the applicable treaty rate is 15%, you have been over-withheld by 15 percentage points. To claim a refund, you will need to file a U.S. tax return — specifically Form 1040-NR — reporting the dividend income, calculating the correct tax at the treaty rate, and claiming the excess withholding as a payment against your tax liability.

On Form 1040-NR, you report the gross dividend income and apply the treaty rate to determine your actual U.S. tax liability. The withholding shown on Form 1042-S is claimed as a credit (a payment already made toward your tax). If the credit exceeds your actual liability (which it will if 30% was withheld and only 15% is owed), the difference is refunded to you. Attach Copy B of Form 1042-S to your 1040-NR as evidence of the withholding. You should also file Form 8833 (Treaty-Based Return Position Disclosure) to disclose your treaty claim, unless the treaty-reduced rate on dividends falls within one of the Form 8833 exceptions.

To support your refund claim, include: Form 1042-S (Copy B), Form 8833 (if required), and a completed Form W-8BEN or W-8BEN-E (to demonstrate treaty eligibility). You should also have a certificate of tax residency from HMRC (Her Majesty's Revenue and Customs) if requested. The IRS may also want to see evidence that you are the beneficial owner of the dividends (not a nominee or conduit). Processing refund claims from nonresident aliens typically takes longer than domestic refund claims — expect 6 months to a year.

The better solution going forward is to prevent the over-withholding from occurring in the first place. Provide the U.S. payer with a properly completed Form W-8BEN (for individuals) claiming the treaty benefit before the next dividend payment. Once the payer has a valid W-8BEN on file, they should withhold at the treaty rate (15%) rather than the default 30%. Form W-8BEN is generally valid for 3 years from the date of signing, after which it must be renewed. Make sure to update it promptly when it expires.

You must file the 1040-NR by the later of: the normal filing deadline (April 15 or June 15, with extensions to October 15), or within 3 years from the date the return was due or 2 years from the date the tax was paid, whichever is later. For a withholding refund, this effectively gives you a 3-year window from the original due date of the return. Do not wait too long — if the statute of limitations expires, you lose the ability to claim the refund permanently.