Vanguard tax advice

GeoffTF

biffer_2 said:

ColdIron said:

Before we go any further can you give us an idea of what sums we are talking about here? I fear you are massively overcomplicating this

It's £100K in LS60% so the gain is within my allowance at the moment.  I guess what I do this year is pretty simple, just sell the lot because I haven't used any of my CG allowance this year. I had intended to change to LS100% going forward so future years may gain more on that sum.  I also may add to what I've got in Vanguard from other investments so it's likely this amount increases before I can move it all into ISAs and (sadly) I may get some inheritance soon.

If you use OEICs outside a tax shelter, you will make working out your tax easier if you buy income units rather than accumulation units. You will make it even easier if you buy the income versions of ETFs. If you want to go 100% equity, you can buy VWRL. VEVE with a market weight of VFEM holds the same stocks, but is cheaper, and is a different investment as far as CGT is concerned. As far as knowing whether or not you are within the rules or not is concerned, you can read them. The HMRC website is very helpful.

If you are using income ETFs, it is dead easy. You subtract the buying price from the selling price and put it on your tax return.

GeoffTF

Switching OEICs can be very slow on the Vanguard platform:

https://www.vanguardinvestor.co.uk/need-help/answer/how-long-does-it-take-to-switch-from-one-fund-to-another

Switching OEICs can be done efficiently however. You can pay some money into your General Account, and schedule simultaneous purchases and sales to that value. (Ideally, you want the two funds to be priced at the same time.) Repeat... Trades are free with Vanguard.

[Deleted User]

Not wanting to throw some more sticks on the bonfire, if you are using Vanguard (well most) ETFs (even distributing) outside a tax shelter (ie in a GIA) then you have to report ERI (excess reportable income - extra income generated by the fund which was not distributed) - it will not be a lot but still needs to be reported

Vanguard give you a step by step document on how to use Vanguard to report all of this on your self assessment

https://www.vanguardinvestor.co.uk/content/documents/general/ga-uk-reporting-fund-guide.pdf

GeoffTF

Deleted_User said:

Not wanting to throw some more sticks on the bonfire, if you are using Vanguard (well most) ETFs (even distributing) outside a tax shelter (ie in a GIA) then you have to report ERI (excess reportable income - extra income generated by the fund which was not distributed) - it will not be a lot but still needs to be reported

Vanguard give you a step by step document on how to use Vanguard to report all of this on your self assessment

https://www.vanguardinvestor.co.uk/content/documents/general/ga-uk-reporting-fund-guide.pdf

Ah, yes, I forgot to mention the dreaded Excess Reportable Income. I had not seen that Vanguard document before, but. after a brief panic, I have established that it is consistent with my understanding. My unsheltered holding of VFEM is managed by Vanguard Funds Plc, so there is no "investor average equalisation adjustment". An example from the financial year 2020-21 might help. Here is the relevant UK Reporting Fund Status (UKRFS) document:

https://www.vanguardinvestor.co.uk/content/documents/legal/vf-plc-excess-reportable-income-30-june-2020.pdf

Here are the numbers for 829 VFEM, (which is currently worth about £41K). The Excess Reportable Income is $0.0812*829/1.36296 $/£ = £49.39. (Do not forget to convert dollars to pounds.) You can add the Excess Reportable income to the CGT base cost of your shares:

https://www.gov.uk/hmrc-internal-manual ... s/ifm13373

GeoffTF

It is also worth noting that the example of a fund with "investor average equalisation adjustment" in the Vanguard document linked above is the Vanguard Small-Cap Index Fund:

https://www.vanguardinvestor.co.uk/investments/vanguard-global-small-cap-index-fund-gbp-acc/overview

That fund is an OEIC domiciled in Ireland. Excess Reportable Income does not only apply to ETFs.

biffer_2

GeoffTF said:

Ah, yes, I forgot to mention the dreaded Excess Reportable Income.

When I signed up to Vanguard I just sent them some money, dialed up a few different life strategy options, bought some ISAs and thought little about it.  I don't know what an OEIC, VWRL, VEVE, VFEM, ETF or GIA means this is all Greek to me [1].

In the end I wimped out and contacted Vanguard support, so I'll see what they say.

[1] Actually I lied I did just google them, still doesn't help that much.

GeoffTF

biffer_2 said:

GeoffTF said:

Ah, yes, I forgot to mention the dreaded Excess Reportable Income.

When I signed up to Vanguard I just sent them some money, dialed up a few different life strategy options, bought some ISAs and thought little about it.  I don't know what an OEIC, VWRL, VEVE, VFEM, ETF or GIA means this is all Greek to me [1].

In the end I wimped out and contacted Vanguard support, so I'll see what they say.

[1] Actually I lied I did just google them, still doesn't help that much.

That is all you need to do in an ISA or SIPP. Outside a tax shelter it is a different matter. You either need to do some studying or get professional help. In the US, brokers do work out your capital gains, but the UK system is not set up for that. When investments are transferred in from another platform, their history is left behind. That makes it impossible for the receiving broker to calculate capital gains and excess reportable income. People have shares that they bought over fifty years ago through brokers that went out of business decades ago. You have to keep your own records if your investments are outside a tax shelter.

If you ask specific questions (e.g. what is an ETF) we can answer them. If you just say that you do not understand, we cannot help.

biffer_2

GeoffTF said:

If you ask specific questions (e.g. what is an ETF) we can answer them. If you just say that you do not understand, we cannot help.

I have many questions, if you have the patience .

I have a Vanguard Life Strategy Accumulation fund 60%, first question would be is it subject to ERI (I'm guessing 'yes' by what I've read so far), but more specifically where exactly in the documentation is this stated.  I looked in that PDF mentioned above but it's not listed there that I can see.

eskbanker

https://www.vanguardinvestor.co.uk/investing-explained/general-account-tax-information includes a list of their products that are subject to ERI, but it doesn't include the LifeStrategy range....

biffer_2

eskbanker said:

https://www.vanguardinvestor.co.uk/investing-explained/general-account-tax-information includes a list of their products that are subject to ERI, but it doesn't include the LifeStrategy range....

Yes I've been there myself, and when it comes to tax issues, making the assumption that something being left off some list means you have no tax liability could be a little risky!