Share Pools And Accumulating Index Funds

ColdIron

muldesia said:

ColdIron said:

muldesia said:

If I invest in two different index funds by the same provider, when it comes to Capital Gains Tax calculation, are they treated as being in two separate share pools?

They are separate pools

Also, if an index fund is non-ISA and is an accumulating one which has UK reporting status, does each reinvestment done automatically by the provider need to be treated as a separate purchase when it comes to working out the share pool when selling?  I'm wondering how arduous this is if it's consistently reinvesting... 

If it's accumulating there will be no automatic reinvestment by the provider

If it's an income fund with dividend reinvestment, they are additional purchases

I'm confused, I thought that was the point in accumulation index funds, that the provider reinvests dividend income back into the index fund?  As opposed to income funds which distribute the dividend income to you instead?  I'm new to this, maybe I'm getting confused!

The income fund will pay the dividends into your account as cash. You will see it in your statement. You can instruct your platform to automatically reinvest that dividend back into the fund. That's a purchase. You will see it in your statements as well

The accumulation fund doesn't pay out the dividend as cash, the provider simply retains it within the fund so there is nothing that needs to (or can) be reinvested by you or your platform. No purchase, Nothing in your statements

The dividend is the same, the net effect is the same, just with the income class it was paid out and put back in again (that purchase)

muldesia

ColdIron said:

muldesia said:

ColdIron said:

muldesia said:

If I invest in two different index funds by the same provider, when it comes to Capital Gains Tax calculation, are they treated as being in two separate share pools?

They are separate pools

Also, if an index fund is non-ISA and is an accumulating one which has UK reporting status, does each reinvestment done automatically by the provider need to be treated as a separate purchase when it comes to working out the share pool when selling?  I'm wondering how arduous this is if it's consistently reinvesting... 

If it's accumulating there will be no automatic reinvestment by the provider

If it's an income fund with dividend reinvestment, they are additional purchases

I'm confused, I thought that was the point in accumulation index funds, that the provider reinvests dividend income back into the index fund?  As opposed to income funds which distribute the dividend income to you instead?  I'm new to this, maybe I'm getting confused!

The income fund will pay the dividends into your account as cash. You can instruct your platform to automatically reinvest that dividend back into the fund. That's a purchase. You will see it in your statements

The accumulation fund doesn't pay out the dividend as cash, it's simply retained within the fund so there is nothing that needs to (or can) be reinvested. No purchase, Nothing in your statements

The dividend is the same, the net effect is the same, just with the income class it was paid out and put back in again (your purchase)

Great, got it, thanks!  I think I'll go down the accumulation route (as opposed to income account) with my non-ISA ETF account then.  As long as I take note of the ERI each year, it doesn't sound too complex.

muldesia

ColdIron said:

muldesia said:

ColdIron said:

muldesia said:

ColdIron said:

muldesia said:

If I invest in two different index funds by the same provider, when it comes to Capital Gains Tax calculation, are they treated as being in two separate share pools?

They are separate pools

Also, if an index fund is non-ISA and is an accumulating one which has UK reporting status, does each reinvestment done automatically by the provider need to be treated as a separate purchase when it comes to working out the share pool when selling?  I'm wondering how arduous this is if it's consistently reinvesting... 

If it's accumulating there will be no automatic reinvestment by the provider

If it's an income fund with dividend reinvestment, they are additional purchases

I'm confused, I thought that was the point in accumulation index funds, that the provider reinvests dividend income back into the index fund?  As opposed to income funds which distribute the dividend income to you instead?  I'm new to this, maybe I'm getting confused!

The income fund will pay the dividends into your account as cash. You can instruct your platform to automatically reinvest that dividend back into the fund. That's a purchase. You will see it in your statements

The accumulation fund doesn't pay out the dividend as cash, it's simply retained within the fund so there is nothing that needs to (or can) be reinvested. No purchase, Nothing in your statements

The dividend is the same, the net effect is the same, just with the income class it was paid out and put back in again (your purchase)

Great, got it, thanks!  I think I'll go down the accumulation route (as opposed to income account) with my non-ISA ETF account then.  As long as I take note of the ERI each year, it doesn't sound too complex.

If you are just going to reinvest anyway then an accumulation fund makes a lot of sense

But. You are using a general investment account an not an ISA. Tax becomes a factor. That dividend can still be taxed, it doesn't make any difference if you kept it in the fund or put it back, and you must account for it

Many people would use the income class as it's much easier to account for the dividend. It's quite possible to use the accumulation class and you will get an annual tax statement to help you but it's not as clean that way

You would also need to take the retained dividend into account when working out your capital gain, which would be part real gain and part dividend. You don't want to pay tax twice for the same thing. More work for that spreadsheet

One of the unexpected responsibilities of a GIA is the need to account for tax and the careful record keeping required to allow you to do it. Anything you can do to make it easier will be well worth it

Yeah, I'm going to invest what I can in equivalent ISA accounts where possible, and anything above that in the GIA, reinvesting dividends.  I believe if they're UK Reporting Status funds, then the only thing I declare each year is the ERI, which I pay income tax on. I do self assessments each year anyway.

When you say accumulation accounts are less clean, do you just mean cause I will be taking the ERI off any future CGT bill?  I thought the retained dividend complexity was just the annual ERI reporting and deduction from CGT when selling?  And the only other records I need to keep would be when I buy and sell shares in the fund?

ColdIron

muldesia said:

ColdIron said:

muldesia said:

ColdIron said:

muldesia said:

ColdIron said:

muldesia said:

If I invest in two different index funds by the same provider, when it comes to Capital Gains Tax calculation, are they treated as being in two separate share pools?

They are separate pools

Also, if an index fund is non-ISA and is an accumulating one which has UK reporting status, does each reinvestment done automatically by the provider need to be treated as a separate purchase when it comes to working out the share pool when selling?  I'm wondering how arduous this is if it's consistently reinvesting... 

If it's accumulating there will be no automatic reinvestment by the provider

If it's an income fund with dividend reinvestment, they are additional purchases

I'm confused, I thought that was the point in accumulation index funds, that the provider reinvests dividend income back into the index fund?  As opposed to income funds which distribute the dividend income to you instead?  I'm new to this, maybe I'm getting confused!

The income fund will pay the dividends into your account as cash. You can instruct your platform to automatically reinvest that dividend back into the fund. That's a purchase. You will see it in your statements

The accumulation fund doesn't pay out the dividend as cash, it's simply retained within the fund so there is nothing that needs to (or can) be reinvested. No purchase, Nothing in your statements

The dividend is the same, the net effect is the same, just with the income class it was paid out and put back in again (your purchase)

Great, got it, thanks!  I think I'll go down the accumulation route (as opposed to income account) with my non-ISA ETF account then.  As long as I take note of the ERI each year, it doesn't sound too complex.

If you are just going to reinvest anyway then an accumulation fund makes a lot of sense

But. You are using a general investment account an not an ISA. Tax becomes a factor. That dividend can still be taxed, it doesn't make any difference if you kept it in the fund or put it back, and you must account for it

Many people would use the income class as it's much easier to account for the dividend. It's quite possible to use the accumulation class and you will get an annual tax statement to help you but it's not as clean that way

You would also need to take the retained dividend into account when working out your capital gain, which would be part real gain and part dividend. You don't want to pay tax twice for the same thing. More work for that spreadsheet

One of the unexpected responsibilities of a GIA is the need to account for tax and the careful record keeping required to allow you to do it. Anything you can do to make it easier will be well worth it

Yeah, I'm going to invest what I can in equivalent ISA accounts where possible, and anything above that in the GIA, reinvesting dividends.  I believe if they're UK Reporting Status funds, then the only thing I declare each year is the ERI, which I pay income tax on. I do self assessments each year anyway.

When you say accumulation accounts are less clean, do you just mean cause I will be taking the ERI off any future CGT bill?  I thought the retained dividend complexity was just the annual ERI reporting and deduction from CGT when selling?  And the only other records I need to keep would be when I buy and sell shares in the fund?

We may be at cross purposes, or I may be. When I was talking about cleanliness I was doing so in the context of funds/OEICs as that is what I thought you were considering. I see now the reference to reporting status in your OP. Apologies if I have muddied the waters

Yes, with accumulating ETFs you only need to account for the ERI annually and also the deduction when calculating the capital gain

I have deleted my post as I think it added more confusion than information