Tax treatment on funds

jnystark

I have looked on google, but wanted to ask if anyone knows whether the tax treatment on holding different types of funds is the same? (Eg ETFs vs unit trusts vs investment trusts) thank you

masonic

There are some differences. OTOH, most ETFs are non-UK domiciled, meaning there can be excess reportable income to declare in addition to dividends. ETF purchases do not incur stamp duty, while investment trusts do and unit trusts may do so on purchase of their underlying assets but not explicitly charged to you. Some unit trusts (I'll assume you are using this term to include open ended funds in general) distribute interest rather than dividends, affecting the way in which the income is taxed. Open ended funds have the concept of equalisation, with group 1 and group 2 units and part of your first income distribution is treated as return of capital rather than income.

jnystark

masonic said:

There are some differences. OTOH, most ETFs are non-UK domiciled, meaning there can be excess reportable income to declare in addition to dividends. ETF purchases do not incur stamp duty, while investment trusts do and unit trusts may do so on purchase of their underlying assets but not explicitly charged to you. Some unit trusts (I'll assume you are using this term to include open ended funds in general) distribute interest rather than dividends, affecting the way in which the income is taxed. Open ended funds have the concept of equalisation, with group 1 and group 2 units and part of your first income distribution is treated as return of capital rather than income.

Thank you, I will look into this and get a better understanding.