20% taken off dividend

sorcerer

My trade account has taken 20% of my dividend I got from P2P Global Investments and Target Healthcare. I also have these in my ISA and they haven't taken any tax.

I was under the impression you could get the first £5000 of dividends tax free for 2016/17, anybody know why they have taken 20% of my dividend? and can I get it back somehow?

Linton

Neither investment pays "dividends". P2P Global Investments pays "interest", at least some of the time. See here. Although banks can now pay gross interest, other companies have to deduct tax. Target Healthcare is a REIT, its payments to shareholders are taxed as "income" - see here.

In both cases it would seem you can claim the tax back, if appropriate, through your tax return. Much easier to hold these investments in an ISA which will automatically refund the tax.

bowlhead99

I have Target. As Linton says, property income distributions are not covered by the dividend allowance because they are basically a share of the income from a property lettings business which Target, as a REIT, has been allowed to receive and pass on without paying any taxes itself.

Aside from the property income distributions you will get some ordinary dividends too. For example, the second interim dividend for Target's 2016/17 financial year with a pay date of 24 Feb was:
Interim Property Income Distribution (PID) 1.256 pence per share
Interim Ordinary Dividend 0.314 pence per share
Total of 1.570p

Only the ordinary div element can be covered by your annual div allowances so you might find it more useful to put them in an ISA or pension wrapper. Of course if you have way more assets that can fit in an ISA you might prefer to put assets with higher growth potential in the ISA so that it grows the size of that wrapper more rapidly and gets you a better long term result, and meanwhile pay up the 20% or 40% tax owed on your PID.

sorcerer

That is really useful thank you guys, the reason I didn't hold these in my ISA was because my ISA was full. But I am thinking if I have any spare subscription this year (2017/18), I might look to move them to my ISA.


I got confused because the government kept going on about no tax needed to be paid on dividends, but I didn't realise these didn't count as dividends. does this change from April 2017, with the new rules, or will this continue.


I fill in a self assessment form, so I will see what the new form looks like in April to see if I can reclaim anything back.

sorcerer

I have other REIT's in my normal account, but I now realize why these are based outside of the UK, it's avoids all this messing about, live and learn I guess.

xylophone

I hold Target in my II ISA - the PID element is always paid net - II reclaim the tax paid and this appears 6-8 weeks after the payment date.

sorcerer

I decided to sell both holdings, and replaced them with Henderson Far Eastern Income. I was worried about P2P anyway, but I still hold it in my ISA, and I don't like the Hassel of holding Target outside an isa, so I might rebuy this in my ISA in the next tax year.