Tax declaration due to investments

pip895

Do you need to pay income tax on this additional income?  Does it become payable annually or only when you sell?
I have always just used the data in HL tax report - "Schedule of overseas income" but there is no mention of this additional amount there.  
If I stay under the CGT limit (selling a bit of BCPT should do it lol) then can I safely ignore the whole thing?

NottinghamKnight

Dividend income is added up and should be reported by your platform. There is a £2k annual allowance over that you may need to pay tax if outside a tax shelter (pension. isa).

masonic

pip895 said:

Do you need to pay income tax on this additional income?  Does it become payable annually or only when you sell?

I've never paid any tax on it because I've never exceeded the dividend allowance and before the dividend allowance was introduced there was no tax to pay for basic rate taxpayers. I put up with it for 3 tax years before changing investments to a UK domiciled fund

Like dividends, ERI is treated as being received on the associated notional distribution date (which is not the same as the dividend distribution date).

pip895 said:

I have always just used the data in HL tax report - "Schedule of overseas income" but there is no mention of this additional amount there. 

You wouldn't expect your platform to mention it in their tax report since they only deal with income distributed per share and not the excess of reportable income over distributions declared by UK-reporting offshore funds.

pip895 said:

If I stay under the CGT limit (selling a bit of BCPT should do it lol) then can I safely ignore the whole thing?

No, because ERI is income, not a capital gain. If you are on self-assessment you must declare it, whereas if you don't fill out tax return you need to declare it if either your total dividend income (including ERI) exceeds your Dividend Allowance, or the effect on your total income for the year creates an overall tax liability (for example by changing your Personal Allowance or pushing you into a higher marginal rate of tax and changing your Personal Savings Allowance).

On the flip side, you can deduct this when calculating any capital gains as it is income.

pip895

According to this :- https://monevator.com/excess-reportable-income/#:~:text=Excess reportable income is the,the taxman wants his slice.
I am off the hook as I'm a basic rate tax payer.  Its a bit of a mine field though - If it was a bond fund I wouldn't be.  I had no clue this complication existed and I very much think I'm not alone in that!  

dales1

The monevator article is helpful, that's true.

But please note that one of the first comments he makes, is that

"Basic-rate taxpayers may think it doesn’t apply to them"

i.e. it DOES apply to basic rate taxpayers. You are not off the hook !

But don't let that put you off at all.

Once you've worked it out and done it once, it's easy after that.

And the amounts involved are normally quite small.

It's a little bit of extra admin, but no problem, that's all.

John464

pip895 said:

According to this :- https://monevator.com/excess-reportable-income/#:~:text=Excess reportable income is the,the taxman wants his slice.
I am off the hook as I'm a basic rate tax payer.  Its a bit of a mine field though - If it was a bond fund I wouldn't be.  I had no clue this complication existed and I very much think I'm not alone in that!  

article is dated 2014
Didn't George Osborne change the dividend tax after that?

pip895

Either way - I will be selling all my unwrapped ETFs before April - probably go for investment trusts - just need to figure out which ones..

masonic

John464 said:

pip895 said:

According to this :- https://monevator.com/excess-reportable-income/#:~:text=Excess reportable income is the,the taxman wants his slice.
I am off the hook as I'm a basic rate tax payer.  Its a bit of a mine field though - If it was a bond fund I wouldn't be.  I had no clue this complication existed and I very much think I'm not alone in that!  

article is dated 2014
Didn't George Osborne change the dividend tax after that?

Correct. There is now a Dividend Allowance, which is not an allowance but a nil rate band. Under both the old and new system, this income must be included in your total income for the year, which decides your marginal rate of tax, so if you are close to the higher rate threshold it could tip you over it, even if just for a few pounds of income.

Provided the additional income does not affect your marginal rate of tax AND this additional income doesn't fall outside of the Dividend Allowance AND you do not complete a tax return, then there is no need to declare the extra income, otherwise you should.

pip895 said:

Either way - I will be selling all my unwrapped ETFs before April - probably go for investment trusts - just need to figure out which ones..

That will avoid this problem cropping up in future tax years, you just need to deal with the current tax year and any past tax years where you have held these ETFs.

John464

TBC15 said:

John464 said:

I have kept my capital gains just under my allowance, so no tax to pay there.
My income is taxed automatically.
But calculated I have about £200 tax to pay on dividends
So registered for self assessment
It directed me to a questionnaire, which I completed, and then it said I don't need to do a self assessment
So I don't know who is wrong, me or them

Details on what to do here https://www.gov.uk/tax-on-dividends

Thanks for the link
But it says ring the helpline which is permanently engaged.
Anyone know if there is another way to inform HMRC about dividends?

eskbanker

John464 said:

TBC15 said:

John464 said:

I have kept my capital gains just under my allowance, so no tax to pay there.
My income is taxed automatically.
But calculated I have about £200 tax to pay on dividends
So registered for self assessment
It directed me to a questionnaire, which I completed, and then it said I don't need to do a self assessment
So I don't know who is wrong, me or them

Details on what to do here https://www.gov.uk/tax-on-dividends

Thanks for the link
But it says ring the helpline which is permanently engaged.
Anyone know if there is another way to inform HMRC about dividends?

You've been given answers to that question on the other thread where you asked it:

https://forums.moneysavingexpert.com/discussion/comment/77787623/#Comment_77787623