Tax on GIA investments

RogerPensionGuy

Below is a link showing how stressful it can be when HMRC get their teeth in to people.

My view is to have as little personal interactions as possible as government agencies do tend to stiff little people, Post Office, Windrush cone to mind, and but it's very hard for the little people to interact with these various government departments. 
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https://www.thisismoney.co.uk/money/experts/article-13278637/TONY-HETHERINGTON-HM-Revenue-Customs-taxed-14-000-savings-wasnt-mine.html

Pat38493

poseidon1 said:

Secret2ndAccount said:

In my opinion it's easier to hold distributing funds in a GIA. If you hold Acc, then you have to calculate the notional dividends each year, and pay tax on them. Then, when you sell, you subtract the income from the capital gain. If you hold distributing units, the tax is the same, but the numbers are a bit more accessible to do the calculations.


One bit of additional info I haven't yet mentioned. If a fund contains more than 60% cash or bonds, then the income is considered interest, not dividends. Need to be aware of this if you go for 'safe' investments in the GIA, and put your volatile stuff in the SIPP/ISA. That's kinda the sensible path so you don't get hit with a load of CGT if your investment is a big winner. Just keep both thoughts in mind.

On the two DIY platforms I use ( HL & ii ), both produce tax year-end dividend and interest reports which summarise your general investment account taxable income for self assessment tax reporting purposes.   The reports will also identify equalisation payments, and should indicate income accumulated where a distribution fund was not utilised.

However, you do have to maintain your own records of taxable gains and losses  for cgt purposes.

If also now seen some information that I also need to understand something called ERI (Excess reportable income), so I guess I would need to look into that as well - this seems to be any income within the fund which is not paid out even if it's an income fund.

Notepad_Phil

Pat38493 said:

poseidon1 said:

Secret2ndAccount said:

In my opinion it's easier to hold distributing funds in a GIA. If you hold Acc, then you have to calculate the notional dividends each year, and pay tax on them. Then, when you sell, you subtract the income from the capital gain. If you hold distributing units, the tax is the same, but the numbers are a bit more accessible to do the calculations.


One bit of additional info I haven't yet mentioned. If a fund contains more than 60% cash or bonds, then the income is considered interest, not dividends. Need to be aware of this if you go for 'safe' investments in the GIA, and put your volatile stuff in the SIPP/ISA. That's kinda the sensible path so you don't get hit with a load of CGT if your investment is a big winner. Just keep both thoughts in mind.

On the two DIY platforms I use ( HL & ii ), both produce tax year-end dividend and interest reports which summarise your general investment account taxable income for self assessment tax reporting purposes.   The reports will also identify equalisation payments, and should indicate income accumulated where a distribution fund was not utilised.

However, you do have to maintain your own records of taxable gains and losses  for cgt purposes.

If also now seen some information that I also need to understand something called ERI (Excess reportable income), so I guess I would need to look into that as well - this seems to be any income within the fund which is not paid out even if it's an income fund.

I can't remember the exact details but from memory ERI is only a possibility if you use non-UK domiciled funds. So unfortunately quite a few popular funds can potentially be caught up with this if you hold them within a GIA platform, e.g. Vanguard FTSE All-World is Irish domiciled but I think something like HSBC FTSE All World would be okay as from memory they are UK domiciled (but note that places like the Isle of Man is not UK domiciled).