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I have an account (Fidelity) in the US which holds my US shares and dividends. I am resident in UK. When I fill in my UK self assessment I usually declare the dividends as foreign income and calculate the total amount received during the last tax year using the US/UK exchange rate.
However, I am beginning to wonder whether this is correct. Do I have to declare the dividends as foreign income even though I have not yet transferred the dividends into a UK account. In other words do I pay UK tax when I am paid the dividend in the US or only when I transfer the dividend from the US account to the UK ?

What you are doing is correct. Don't change it.

So declaring it as foreign income, even though I have not yet transferred the dividends into a UK account is correct?
Does the same apply to US shares? If i were to sell them then the funds would reside in the US account and I would have to declare it as foreign income even thought I have not brought the proceeds into the UK yet?
I have looked on the web and cannot find anywhere that clarifies this.

Yes. (s403(1) Income Tax (Trading and Other Income Act) 2005)

Yes. (s1(1) Taxation of Chargeable Gains Act 1992)

Assuming you are either domiciled in the UK, deemed domiciled in the UK or taxable on the arising basis; you are calculating things correctly.

You are entitled to claim double tax relief up to 15% tax on US source dividends. Do remember if you own any US mutual funds to report capital gains distributions to HMRC and to treat any capital gains on non-UK reporting funds as taxable offshore income gains.