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    • jc86
    • By jc86 2nd Oct 17, 12:35 PM
    • 22Posts
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    jc86
    Accumulation Units and Tax
    • #1
    • 2nd Oct 17, 12:35 PM
    Accumulation Units and Tax 2nd Oct 17 at 12:35 PM
    Hi Everyone,

    Just trying to get my head around ACC units, and how tax works.

    Assuming that you had £100k of ACC units, outside of an ISA, and that the value grew £10k per year by virtue of reinvestment growth.

    1) Does the 10k PA of growth attract income tax in the same way that dividends from income units would have done?

    2) If so, if you came to sell all £110k of value, would the capital gains tax be zero, as you had already paid income tax on the additional 10k gain?

    Trying to make sense of it, as it seems there is a potential overlap of income and capital gains tax on ACC units?

    Thanks!
Page 1
    • TrickyDicky101
    • By TrickyDicky101 2nd Oct 17, 1:03 PM
    • 2,827 Posts
    • 1,829 Thanks
    TrickyDicky101
    • #2
    • 2nd Oct 17, 1:03 PM
    • #2
    • 2nd Oct 17, 1:03 PM
    I *believe* you should get a dividend voucher for any distributions in the year (albeit that have been reinvested or 'accumulated' rather than paid out). So you would need to account for any tax due on this beyond the dividend allowance and your particular tax circumstances.

    The distribution will increase the book cost of your holding which will thus reduce the total chargeable gain (or increase the chargeable loss) in the event of a disposal:

    ie Chargeable gain = Disposal proceeds less (Cost plus distributions reinvested in your period of ownership)
    • 00ec25
    • By 00ec25 2nd Oct 17, 1:40 PM
    • 5,559 Posts
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    00ec25
    • #3
    • 2nd Oct 17, 1:40 PM
    • #3
    • 2nd Oct 17, 1:40 PM
    you WILL receive a dividend voucher informing you to the penny how your dividend entitlement has been reinvested in the purchase of additional units

    obviously the dividend voucher amount is subject to income tax

    equally obviously the units purchased with your dividend will be subject to CGT when you sell them, the cost price being the "conversion rate" of dividend into units
    • jc86
    • By jc86 2nd Oct 17, 2:57 PM
    • 22 Posts
    • 2 Thanks
    jc86
    • #4
    • 2nd Oct 17, 2:57 PM
    • #4
    • 2nd Oct 17, 2:57 PM
    Thank you both - think I understand.

    So essentially, I would use the tax voucher to check what tax was due, and fill out a self assessment should there by tax to be paid.

    Then with CGT, the amount of tax would be the income from the sale of the units, minus the original investment and subsequent re-investment which used taxable dividend?
    • TrickyDicky101
    • By TrickyDicky101 2nd Oct 17, 3:09 PM
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    TrickyDicky101
    • #5
    • 2nd Oct 17, 3:09 PM
    • #5
    • 2nd Oct 17, 3:09 PM

    equally obviously the units purchased with your dividend will be subject to CGT when you sell them, the cost price being the "conversion rate" of dividend into units
    Originally posted by 00ec25
    There won't be any unit changes with accumulation units.

    What you describe is if you have income units that automatically (or manually) get reinvested back into the same units - you can elect with some providers for this to happen with distributions.
    • jc86
    • By jc86 2nd Oct 17, 3:38 PM
    • 22 Posts
    • 2 Thanks
    jc86
    • #6
    • 2nd Oct 17, 3:38 PM
    • #6
    • 2nd Oct 17, 3:38 PM
    ...and this is "income tax" or "dividend tax" payable when ACC units reinvest within themselves?
    • 00ec25
    • By 00ec25 2nd Oct 17, 4:06 PM
    • 5,559 Posts
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    00ec25
    • #7
    • 2nd Oct 17, 4:06 PM
    • #7
    • 2nd Oct 17, 4:06 PM
    There won't be any unit changes with accumulation units.

    What you describe is if you have income units that automatically (or manually) get reinvested back into the same units - you can elect with some providers for this to happen with distributions.
    Originally posted by TrickyDicky101
    but the fact remains that the dividend voucher WILL show the amount of TAXABLE dividend which has been distributed in the form of an increase to the "value" of the units in the fund

    you cannot hold accumulation units and think that they are (income) tax free, they are not, you still get a taxable dividend, it just so happens it is not in the form of actually cash paid to your bank account (or reinvested in more units) it is instead in the form of an increase to the value of the fund. However that increase is subject to income tax, not CGT

    http://monevator.com/income-tax-on-accumulation-unit/
    • 00ec25
    • By 00ec25 2nd Oct 17, 4:07 PM
    • 5,559 Posts
    • 4,954 Thanks
    00ec25
    • #8
    • 2nd Oct 17, 4:07 PM
    • #8
    • 2nd Oct 17, 4:07 PM
    ...and this is "income tax" or "dividend tax" payable when ACC units reinvest within themselves?
    Originally posted by jc86
    yes,
    read
    http://monevator.com/income-tax-on-accumulation-unit/
    • TrickyDicky101
    • By TrickyDicky101 2nd Oct 17, 5:33 PM
    • 2,827 Posts
    • 1,829 Thanks
    TrickyDicky101
    • #9
    • 2nd Oct 17, 5:33 PM
    • #9
    • 2nd Oct 17, 5:33 PM
    but the fact remains that the dividend voucher WILL show the amount of TAXABLE dividend which has been distributed in the form of an increase to the "value" of the units in the fund

    you cannot hold accumulation units and think that they are (income) tax free, they are not, you still get a taxable dividend, it just so happens it is not in the form of actually cash paid to your bank account (or reinvested in more units) it is instead in the form of an increase to the value of the fund. However that increase is subject to income tax, not CGT

    http://monevator.com/income-tax-on-accumulation-unit/
    Originally posted by 00ec25
    Have you actually read what I have posted in my two replies into this thread? Kindly indicate where I have stated anything that conflicts with this.
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