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Dividend Issues With Shares Held Outside A S&S ISA?

Hi all,

Hope someone can update me on this as im struggling to find the correct answer! I'm a basic rate taxpayer and likely to remain so!

I am currently investing £100 a month in my Halifax Sharebuilder account (£1.50 dealing charge) to buy a range of IShares. The advantages are I can stop/start/change the investment at any time, its cheap and there are no annual costs. I'm not holding this within an ISA as I have seperate funds held with Fidelity (UK Index, Euro Index & Global - £150 a mth) this S&S doesn't attract a fee (but I can only trade in Fidelity funds unless I upgrade the ISA to a self select one in which case id move to selftrade and trade in the OEIC's for ETF's). The reasons for the split are the Fidelity funds are more medium term, and the Halifax is mega long term buy/hold, by keeping the funds seperate I know whats for what (if you understand what I mean)

With regards to dividends from the ETF's in the Halifax Sharebuilder, do I get taxed further on these because its outside of ISA? I've read that ETF's don't qualify for a 10% tax credit (on dividends) no matter where they are held.

Is my only worry about CGT (on the Halifax ETF's) when/if I decide to trade these shares in?

Appreciate any help! :money:

Comments

  • debbie42
    debbie42 Posts: 2,586 Forumite

    With regards to dividends from the ETF's in the Halifax Sharebuilder, do I get taxed further on these because its outside of ISA? I've read that ETF's don't qualify for a 10% tax credit (on dividends) no matter where they are held.

    Is my only worry about CGT (on the Halifax ETF's) when/if I decide to trade these shares in?

    If you are a basic rate tax payer then you shouldn't have any more to pay on the dividends as it should be deducted at source.

    Have you seen this?

    http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnSavingsAndInvestments/DG_4016453
    Debbie
  • SavingTom11
    SavingTom11 Posts: 12 Forumite
    Part of the Furniture Combo Breaker
    If you pay tax at or below the basic rate

    You have no tax to pay on your dividend income because the tax liability is 10 per cent - the same amount as the tax credit - as shown in the tables.

    Explains it all :) Thanks very much on the dividends question, so CGT is my only worry when I come to sell the shares, great thanks very much :)
  • jem16
    jem16 Posts: 19,702 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Just watch your dividend income does not take you into the higher rate tax bracket as you must add this income to any other income.
  • gt94sss2
    gt94sss2 Posts: 6,187 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I am currently investing £100 a month in my Halifax Sharebuilder account (£1.50 dealing charge) to buy a range of IShares. The advantages are I can stop/start/change the investment at any time, its cheap and there are no annual costs.

    With regards to dividends from the ETF's in the Halifax Sharebuilder, do I get taxed further on these because its outside of ISA? I've read that ETF's don't qualify for a 10% tax credit (on dividends) no matter where they are held.


    Not sure why this post moved boards, as you are asking about a non-ISA investment.

    Anyway..

    iShares are listed on the Dublin stock exchange and therefore their dividends are considered to be 'foreign dividends' and do not qualify for the 10% UK notional tax credit and are paid 'gross'

    This means that if you are a UK basic rate taxpayer, you should be paying tax on these dividends of 10% (if held outside an ISA)


    You may find this article may also help explain the current rules to you.

    However, there is also an Inland Revenue exemption if the total dividend received from foreign shares is less than £300 and you have not been asked to fill in a tax return (which is likely if you are a basic rate taxpayer) - so in these cases it would effectively be tax free.

    In addition, in the last budget, it was announced that from April 2008, the 10% notional tax credit will be extended to overseas dividends, subject to the individual concerned not owning more than 10% of the company, nor being in receipt of more than £5,000 annually from such sources - so you shouldn't have to worry about this at all from then.

    Regards
    Sunil
  • Mr_Mumble
    Mr_Mumble Posts: 1,758 Forumite
    You can avoid all the hassle with foreign divis on the main FTSE trackers by buying Lyxor's flavour of ETF rather than Barclay's. This may not worthwhile for you since there'd be doubling up on potential sale trading costs if you held, for example, two FTSE-100 trackers.
    "The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 1848.
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