ETFs - taxes and currencies

SavingStudent1

masonic said:

SavingStudent1 said:

Suppose I buy £25000 of VUAG today and it goes up by 18% over the next year. It is now worth £29500 and I sell it immediately, making a profit of £4500. I know in practice, there might be fees etc. - but ignoring these. I've bought in GBP, so no FX fees.

I now owe £1500 of CGT to pay. Is that correct? Despite the base currency being USD, since I bought in GBP - I avoid any issue of the base currency/traded currency being different?

However, I assume if I'm trying to calculate dividend income - this issue will arise. Suppose it earned £1000 in dividends that was reinvested in the stocks, then I owe '£500' in dividends tax. However, as the base currency is USD, the figure won't be in GBP - it might be say $1300 USD which is equivalent to £1000 GBP, which makes me know I owe £500 eligible for dividends tax. 
  
Also, what do you mean by allowance costs and bad and breakfasting?

Correct as far as the currency stuff goes. In practice, you will have things you can deduct from your raw gain, like any accumulated dividends or excess reportable income for each year you held the shares, and costs you incurred that are permitted to be included in the calculation (allowable costs). The bed & breakfast rules will be very easy for you to look up and familarise yourself with. Perhaps that's something you can take away as homework and come back with any specific questions.

Thanks, that makes sense. I assume we can remove excess reportable income from the raw gain, simply because that doesn't come under 'capital gains tax' but rather 'dividends' tax, so they'll be used to see any tax I need to pay on dividends. Namely, the money earned under dividends should only be subject to dividend tax, even if this was re-invested to buy the share - it would be treated as 'dividend income'.