Any tax due on a dealing account?

longwalks1

Im sure I read somewhere recently, that anyone who’s a higher-rate taxpayer (40%) and earns more than £500 in interest in a savings account is liable for tax under the PSA.

Does this only apply to actual savings accounts?

Im asking as i am currently maxing out my S&S ISA each year, and am adding to a dealing account where I invest in 4 or 5 ETFs to build up enough to max out my S&S ISA at the start of the new tax year. 

My dealing account is growing by £1000+ a year, so am I going to be hit with a tax bill at some point?  

How is any tax that is due calculated?  Because I’m adding to it, and sometimes withdrawing again, throughout the year.  It’s almost used as a 2nd current account.  I might add £1000 a month, but in 3 months time take £2000 out for a large expense etc.

Unsure how to work out my actual interest earned due to the above, and investment price fluctuations throughout the year 

Hope that makes sense, and thank you everyone in advance 

eskbanker

There's no tax liability if using ISAs but if you're buying and selling investments outside that wrapper then you need to keep track of gains for every disposal, in order to ascertain your liability for capital gains tax:

https://www.gov.uk/tax-sell-shares

gt94sss2

If your broker pays interest on cash held in the dealing account, that also counts when calculating your PSA.

You should get an annual statement from your broker after the end of each tax year in relation to dividends and interest for your dealing account 

As above and additionally, any capital gain could also be subject to Capital Gains tax

kimwp

If investing outside a tax wrapper, you need to understand Capital gains tax and tax on dividends (even if using accumulation ETFs). I think there are other ones depending on specific circumstances.

badger09

And don’t forget tax on dividends over £500 outside an ISA/SIPP

wmb194

longwalks1 said:

Im sure I read somewhere recently, that anyone who’s a higher-rate taxpayer (40%) and earns more than £500 in interest in a savings account is liable for tax under the PSA.

Does this only apply to actual savings accounts?

Im asking as i am currently maxing out my S&S ISA each year, and am adding to a dealing account where I invest in 4 or 5 ETFs to build up enough to max out my S&S ISA at the start of the new tax year. 

My dealing account is growing by £1000+ a year, so am I going to be hit with a tax bill at some point?  

How is any tax that is due calculated?  Because I’m adding to it, and sometimes withdrawing again, throughout the year.  It’s almost used as a 2nd current account.  I might add £1000 a month, but in 3 months time take £2000 out for a large expense etc.

Unsure how to work out my actual interest earned due to the above, and investment price fluctuations throughout the year 

Hope that makes sense, and thank you everyone in advance 

No, it's all forms of interest. Savings accounts, government and corporate bond coupons, interest paid by brokerage accounts, ETFs, investment trusts and so on. There's a £500 0% rate for dividends as well.

How is it calculated? Are you keeping track of all the transactions in the account? You need to keep track of all income - including interest, dividends, excess reportable income (re foreign funds/ETFs), PIDs - and CGT transactions and make a declaration to HMRC if you meet the reporting thresholds. I do it via Self Assessment but there are other ways. 

As mentioned above, you need to watch out for dividends paid on ACC funds/ETFs. You need to factor these as well.

At the end of the tax year your broker should supply a tax certificate that'll help with this but you need to double check it's correct.

poseidon1

Just an observation, but have to wonder whether the OP's lack of understanding of the  complex tax compliance regime and record keeping implicit in investing,  is typical of the majority of those entering the investment arena for the first time  outside of a tax free wrapper.

I would suggest it is only a relative few of us ( even on this forum), who are properly aware of the tax compliance complexities of investing outside of tax wrappers,  and this knowledge  often gained either from assiduous self learning or having worked or are working in the tax advice industry in some capacity.

For my own part it  helped to have been a self assessment filer over the last 18 + years, but fundamental understanding was gained as a professional in the tax planning and advisory  industry from a very early age.

However, as a retiree, it is only in the past few years that I have come to realise the almost complete lack of understanding of the investment world and related taxes amongst my  peer group of friends and relatives.

For the overwhelming majority of them, this lack of knowledge is most unlikely to ever change now they are retirees (interestingly most were teachers or local government workers) ,  with consequences for their own children, grand children and generations to come.

longwalks1

Thank you all, obviously a lot more reading to do. 
Can I hold investments in joint names with my wife/civil partner? Think its known as gift relief?
She doesn't work so currently is under the tax threshold, and if we were to hold investments jointly, would it need to be in a joint dealing account? 
Hope that makes sense, as it is 02:45 after a long shift

kimwp

poseidon1 said:

Just an observation, but have to wonder whether the OP's lack of understanding of the  complex tax compliance regime and record keeping implicit in investing,  is typical of the majority of those entering the investment arena for the first time  outside of a tax free wrapper.

I would suggest it is only a relative few of us ( even on this forum), who are properly aware of the tax compliance complexities of investing outside of tax wrappers,  and this knowledge  often gained either from assiduous self learning or having worked or are working in the tax advice industry in some capacity.

For my own part it  helped to have been a self assessment filer over the last 18 + years, but fundamental understanding was gained as a professional in the tax planning and advisory  industry from a very early age.

However, as a retiree, it is only in the past few years that I have come to realise the almost complete lack of understanding of the investment world and related taxes amongst my  peer group of friends and relatives.

For the overwhelming majority of them, this lack of knowledge is most unlikely to ever change now they are retirees (interestingly most were teachers or local government workers) ,  with consequences for their own children, grand children and generations to come.

I would say so. I started investing in a GIA earlier in the year and it took a while to figure out how the basic savings interest, dividends and CGT work especially with relation to the higher rate tax threshold. I see other things mentioned like excess reportable income and it feels like another mountain to climb to piece it all together.

jimjames

longwalks1 said:

How is any tax that is due calculated?  Because I’m adding to it, and sometimes withdrawing again, throughout the year.  It’s almost used as a 2nd current account.  I might add £1000 a month, but in 3 months time take £2000 out for a large expense etc.e 

That really doesn't sound like a suitable use for investment account. Investments are long term not designed to be used as an emergency fund. You'd be much better keeping a cash buffer in an instant access account and only move money across into investments once you have spare. Have you also put as much into pensions? That will also negate the need to keep records

Albermarle

poseidon1 said:

Just an observation, but have to wonder whether the OP's lack of understanding of the  complex tax compliance regime and record keeping implicit in investing,  is typical of the majority of those entering the investment arena for the first time  outside of a tax free wrapper.

I would suggest it is only a relative few of us ( even on this forum), who are properly aware of the tax compliance complexities of investing outside of tax wrappers,  and this knowledge  often gained either from assiduous self learning or having worked or are working in the tax advice industry in some capacity.

For my own part it  helped to have been a self assessment filer over the last 18 + years, but fundamental understanding was gained as a professional in the tax planning and advisory  industry from a very early age.

However, as a retiree, it is only in the past few years that I have come to realise the almost complete lack of understanding of the investment world and related taxes amongst my  peer group of friends and relatives.

For the overwhelming majority of them, this lack of knowledge is most unlikely to ever change now they are retirees (interestingly most were teachers or local government workers) ,  with consequences for their own children, grand children and generations to come.

I understand enough, that I have actively avoided investing outside an ISA/Pension.

I think the OP would be wise to do the same, and save themselves a headache. Especially as they regularly adding and withdrawing to the account, which is normally not advisable anyway with an investment account.