The tax treatment of OEICs/ITs/ETFs

C_Mababejive

I'm trying to learn about the tax treatment of various investments with a view to generating growth but minimising personal taxation.

I know that if income is distributed then it is treated as taxable income,like dividends.

What about investments such as OEICs? Effectively what are the best vehicles for generating growth without flagging any or too much as taxable incomes?

Thanks

AnotherJoe

There is a phrase "dont let the tax tail wag the dog".
In any case there is no magic, unless you perhaps look at VCTs, but its easy to get your fingers burned with them.

Income is treated as income whether its distributed or accumulated.
Have you maximised ISAs and SIPPs?

00ec25

an OEIC is not a tax wrapper, so will not prevent it being taxable income.

Whether income or accumulation, an OEIC is simply a legal structure for the way the investment fund operates, it has nothing to do with your tax exposure. You can read up on the history of the transition from "unit trust" to OEIC yourself, for that is now what it is, nothing more than a page in history.

C_Mababejive

Yes,,but what i am thinking of is say you hold an investment that pays a dividend of 6% but the distributed element of an OEIC is 1.6% then the tax position would be less obviously with the caveat expressed by "anotherJoe". ???

Equally, you might have taxable savings exposed to 20% and you might instead consider moving them to a diversified IT with a taxable position of maybe 7.5% with acceptance of a change in risk profile.

AnotherJoe

C_Mababejive wrote: »

Yes,,but what i am thinking of is say you hold an investment that pays a dividend of 6% but the distributed element of an OEIC is 1.6% then the tax position would be less obviously with the caveat expressed by "anotherJoe". ???
It doesn't matter whats distributed it comes to the same thing. The only (main?) pooled investment with special tax treatment is VCTs.


Equally, you might have taxable savings exposed to 20% and you might instead consider moving them to a diversified IT with a taxable position of maybe 7.5% with acceptance of a change in risk profile.

Thats a wholly different thing. Thats saving vs investing.

Getting back to the start, you said initially "generating growth but minimising personal taxation"
Why?

Shouldn't your aim be to maximise overall growth after tax, whatever the combination of growth and income?
The way you've stated it, 1% growth and no personal taxation would be preferable to 200% growth and 1% personal taxation.
You also didn't answer my Q, have you maximised SIPPs and ISAs? Because thats the simple way to do it.

C_Mababejive

Well im about to do some Bed and ISA activities and have a look at a SIPP top up. Can i have 200% growth and 1% taxation..??