Hargreaves Lansdown - Corporate Action with Accumulation Fund?

EdSwippet

Something often overlooked is that you only get equalisation as part of fund dividend payouts. If you hold an ETF -- or a plain share, for that matter -- outside of a shelter such as a SIPP or an ISA, the entire dividend is always taxable.

This argues for timing purchases carefully when close to or around ex-dividend dates.

In the best case, buy the day after the ex-dividend date. In the worst, you might buy the share or ETF the day before the ex-dividend date. In that instance, the entire dividend you are paid is effectively return of capital, but it is nevertheless taxed to you as income, and potentially at rates in excess of 32.5%. Paying income tax on a return of capital is not good -- well, not for you of course, but it is a nice windfall for the government. If you did the same thing with a fund the entire dividend would be classed as non-taxable equalisation.