ETF's and taxes

Adyinvestment

Hi all, I am a little confused by ETF taxes and seem to be going around in circles (newbie to investing)
Having had an unexpected income year I am trying to invest as easily and tax efficient as possible (emphasis on easily)
Maxed out pension and ISA - I also already have some dividend shares that should exceed the £2000 allowance
I have set up a Vanguard general investment account and wanted to simply buy some ETF's that were only taxed capital gains tax when sold, my thinking was as an additional rate tax payer this year (and possibly next) I do not want to pay dividend or income tax tax at the highest rate. I have since confused myself and am not sure which ETF's are ONLY capital gains tax?
The Vanguard ETF's are below (h missing at beginning as can't post links yet), could someone clarify my thinking please.

ttps://www.vanguardinvestor.co.uk/what-we-offer/all-products

csgohan4

https://www.gov.uk/tax-sell-shares

Has guidance on selling, in terms of dividends

https://www.gov.uk/tax-on-dividends

exceeding above 2k you will be taxed on this as well. People on here keep a spreadsheet of dividend payouts and what the gain is when they sell for tax return purposes on investment not in tax wrappers of course

Adyinvestment

Thank you for your reply - I have seen that and think I understand.

To put it a bit more simply, I would like to invest in a fund similar to a share where you pay capital gains tax only (not income or dividend) on profits when sold.

Dazed_and_C0nfused

Maxed out pension and ISA - I also already have some dividend shares that should exceed the £2000 allowance

This won't impact you at the moment but there is no "allowance" for dividends.

as an additional rate tax payer this year (and possibly next) I do not want to pay dividend or income tax tax at the highest rate.

The first £2,000 dividend income is taxed at 0% and is included in your adjusted net income calculation so if your overall taxable income drops you may find that the £2,000 dividend income adds £400 to your overall tax liability (from the loss of £1,000 of your Personal Allowance)

dunstonh

 I have since confused myself and am not sure which ETF's are ONLY capital gains tax?

You are looking for zero yield in your filters.   It would help if you didn't limit yourself to Vanguard ETFs and went with a whole of market platform.  Your choice would be wider.

LobsterMemory

Not my area but would there be commodity ETFs that fit the bill if they don't pay a dividend?

Adyinvestment

dunstonh said:

 I have since confused myself and am not sure which ETF's are ONLY capital gains tax?

You are looking for zero yield in your filters.   It would help if you didn't limit yourself to Vanguard ETFs and went with a whole of market platform.  Your choice would be wider.

Thank you - that is what I am after. How do I know which ETF's have Zero yield?
I instantly though about the bond ETF's but then read somewhere these could be taxed as income?

Adyinvestment

LobsterMemory said:

Not my area but would there be commodity ETFs that fit the bill if they don't pay a dividend?

Yes, I think that is what I want - I just don't know how to find them...at least on Vanguard.

AnotherJoe

Adyinvestment said:

dunstonh said:

 I have since confused myself and am not sure which ETF's are ONLY capital gains tax?

You are looking for zero yield in your filters.   It would help if you didn't limit yourself to Vanguard ETFs and went with a whole of market platform.  Your choice would be wider.

Thank you - that is what I am after. How do I know which ETF's have Zero yield?
I instantly though about the bond ETF's but then read somewhere these could be taxed as income?

This is letting the tail wag the dog.

Pick the investment first and focus on total returns vs risk. If you find an ETF that doesnt pay dividends thats likely to be because its in high risk investments which may not be what you want.

Alexland

From a UK tax perspective you are liable for all income generated (equity dividends or bond interest) regardless of if you use an accumulating or distributing ETF. As such if you wanted to focus your investment entirely on companies that pay no dividends you would be looking for early stage speculative investments, companies that focus soley on growth, alternative assets such as gold, etc which you are unlikely to find on Vanguard's platform. Is that really what you want to do with the money?

Adyinvestment

My understanding is that you do not actually get the dividends separately in an ETF, this is put back into the fund which raises the funds price? but you still have to allow for the dividend on your tax return?
This means you are actually paying tax on the dividend part twice? once on your return as dividend tax and then again as profit on the ETF?
I said I was confused...