Buying foreign index funds in ISA

Steven124

Hi everyone,
I am new to investing in ISA. I have opened up an account with iWeb.

In iWeb, I want to buy US index funds. Will there be any tax consequences.

Thanks in advance.

Exodi

All assets (e.g. investments, cash, etc) that can be held within an ISA are exempt from UK tax, it's the main reason people use ISA's.

If wanting to invest in US index funds (as is typical from a novice investor sorting by historic growth and nodding at the S&P500), there are plenty of GBP denominated ETF's or mutual funds to chose from.

(I say this as you can't hold foreign currencies in an ISA, so all eligible funds would be denominated in GBP).

+ technically the US would levy taxes on dividends from US investments, but it depends on what types of funds you intended to invest in.

Steven124

Thanks Exodi.

masonic

Depends what you mean by "US index funds". If you mean index funds that are marketed and domiciled within the US, then you won't be able to because UK investment firms cannot market investments that don't have an adequate cost disclosure document for the UK market. If you mean index funds marketed and domiciled in the UK or EU that hold US companies as their underlying investments, then no issues there. The domicile of the funds in question will affect how much withholding tax gets removed from dividends before you get the benefit of them. For example, Ireland has a better tax treaty with the USA than Luxembourg. You'll struggle to avoid the last 15% withholding tax being retained whatever you do.

Steven124

Hi Masonic 
My ISA is through iWeb (UK based). Thanks 

Exodi

Steven124 said:

Hi Masonic 
My ISA is through iWeb (UK based). Thanks 

 Masonic is referring to the funds you invest in, not the platform.

Steven124

Thanks again.

I didn't buy US index funds. Instead,I ended up buying these two funds in my ISA (iWeb platform).
1-Fidelity index world P ACC (FIAAGM) and 
2-legal general intl idx tst I (LGII).

No UK (or any other countries) tax issues that I have to deal with. Am I correct?

masonic

Nothing that you need concern yourself with or deal with personally.

That's an odd pairing. One being a developed world tracker and the other a developed world ex-UK tracker. Did you want even less exposure to UK equities than the ~3.5% you get from the first fund?