Foreign Income and self assessment

Confusedbyselfassessment

Dear Forumites  
I am not actually trying to "cut" tax but did not know where else to post this!  I would be quite happy to pay the appropriate amount of tax, but am unsure about how to put this on the self assessment form.

Fully appreciate no one can give me advice!  I have actually tried to register myself on the HMRC community forum but it would not let me and when I tried to report a technical fault the system appeared to crash!

My question is this - I inherited some money in Germany.  Some of this is invested in investments funds and some is in a savings account, generating interest.  I believe I need to report the savings interest in the "foreign" section of my self assessment tax return.  I am unclear however about the "dividend income". HMRC's video on foreign income appears to indicate that I need to declare dividend income  as well.  However, the funds that i am investing in are not paying out the dividends, they are reinvested.  Do I need to declare them regardless?  I am not using any of that money (savings interests or any investment gains)  in any way at the moment, it's simply there and I hope is growing a bit.  

Brie

I was told that foreign income only needs to be reported when it is brought to the UK or otherwise used in the country where it "lives".  Something to do with the fact that how do you know how much to report until you can convert it to GBP.  For reinvested dividends I would have suspected that you don't have any money until the shares become cash (& converted to GBP) as they may end up being zero value if the shares take a dive.

More_complicated_than_that

Confusedbyselfassessment said:

My question is this - I inherited some money in Germany.  Some of this is invested in investments funds and some is in a savings account, generating interest.  I believe I need to report the savings interest in the "foreign" section of my self assessment tax return.  I am unclear however about the "dividend income". HMRC's video on foreign income appears to indicate that I need to declare dividend income  as well.  However, the funds that i am investing in are not paying out the dividends, they are reinvested.  Do I need to declare them regardless?  I am not using any of that money (savings interests or any investment gains)  in any way at the moment, it's simply there and I hope is growing a bit.  

I assume that you are domiciled in the UK (or, if not, don't use the remittance basis of tax).  

Yes, you need to report foreign savings income on your tax return.  Up to £2,000 can be reported on the main pages, otherwise you need to include it on the foreign supplemental pages - https://www.gov.uk/government/publications/self-assessment-foreign-sa106

Similarly, you need to report foreign dividends of up to £1,000 on the main pages of your tax return, otherwise it is again on the foreign supplemental pages.

The fact that you have foreign funds makes things a lot more complicated.  Sorry but I'm not going to explain that here.  The key is whether the funds are "reporting" funds for UK tax purposes.  You also need to understand whether (i) the income is distributed as a dividend and then reinvested, or (ii) no dividends are paid.  This can be different for different classes of shares/units in the same fund.  This is a random page I found on the internet that briefly explains the differences: https://www.evelyn.com/services/business-tax/reporting-funds/  

More_complicated_than_that

Brie said:

I was told that foreign income only needs to be reported when it is brought to the UK or otherwise used in the country where it "lives".  Something to do with the fact that how do you know how much to report until you can convert it to GBP.  For reinvested dividends I would have suspected that you don't have any money until the shares become cash (& converted to GBP) as they may end up being zero value if the shares take a dive.

Sorry, but little of that is right.  

For some people (certain non-domiciled individuals taxed on the remittance basis) the income is only taxed when it is remitted to the UK.  This is a very narrow category of people. 

I have no idea what you mean by: 'it "lives"'.

You convert foreign currency at the exchange rate when you receive it (although you can use, for example, the monthly exchange rate if you do so on a consistent basis).

Reinvested dividends are taxed when paid.  But as I say in my earlier post, undistributed income is taxed in a different way depending on the reporting status of the fund.  Whether or not what is bought with the reinvested dividends grows or falls in value does not change the tax treatment of dividends (although it would change the way that undistributed income is taxed in a fund that's not a reporting fund - since the gain on disposal is taxed as income).  

Bookworm105

Brie said:

 For reinvested dividends I would have suspected that you don't have any money until the shares become cash (& converted to GBP) as they may end up being zero value if the shares take a dive.

sorry but as a blanket statement that is just totally wrong
the dividend is the item being taxed, not what that money is spent on (reinvestment in more shares).