Profits/return on VWRP via Trading 212

solidpro

If you maxxed out your annual SIPP, ISA, Premium Bonds, Got rainy day fund and you just open a personal account on Trading212 and buy some shares in VWRP, do I have to report these on my annual self asseseement and pay tax on my annual return, or is it all done at source via my account on Trading212?

thanks

GeoffTF

You have to do the tax reporting yourself. You will have to learn about Excess Reportable Income, amongst other things, or use an accountant.

solidpro

I already have an accountant prepare my self assessment for me. If I inform the accountant I have a GIA, will Trading212 create some easily exportable date at the end of the personal FY which will summarise the necessaries for the P60/accountant? 

GeoffTF

solidpro said:

I already have an accountant prepare my self assessment for me. If I inform the accountant I have a GIA, will Trading212 create some easily exportable date at the end of the personal FY which will summarise the necessaries for the P60/accountant? 

A listing of all your trades and dividends with dates should be enough. Your accountant should be able to do the rest. It was not a good idea to use an accumulating ETF outside a tax shelter. That does not complicate the tax reporting, but you could pay more tax than you would with the distributing version VWRL in some circumstances. VWRL and VWRP are expensive funds. VEVE is much cheaper, and you can add about 10% VFEM to add a market weight of emerging markets if you wish.

solidpro

Ok thanks, I switched to distributing! I don't understand why accumulating is less tax efficient than distributing in a GIA but I trust most opinions on this specific matter over mine!

rich06

GeoffTF said:

A listing of all your trades and dividends with dates should be enough. Your accountant should be able to do the rest. It was not a good idea to use an accumulating ETF outside a tax shelter. That does not complicate the tax reporting, but you could pay more tax than you would with the distributing version VWRL in some circumstances. VWRL and VWRP are expensive funds. VEVE is much cheaper, and you can add about 10% VFEM to add a market weight of emerging markets if you wish.

Could you expand on why accumulating funds are less tax efficient than distributing funds in a GIA? 

Thanks!

GeoffTF

rich06 said:

GeoffTF said:

A listing of all your trades and dividends with dates should be enough. Your accountant should be able to do the rest. It was not a good idea to use an accumulating ETF outside a tax shelter. That does not complicate the tax reporting, but you could pay more tax than you would with the distributing version VWRL in some circumstances. VWRL and VWRP are expensive funds. VEVE is much cheaper, and you can add about 10% VFEM to add a market weight of emerging markets if you wish.

Could you expand on why accumulating funds are less tax efficient than distributing funds in a GIA?

If you ever withdraw a dividend from the a distributing fund, you only pay (dividend or income) tax on the dividend. I you ever withdraw a dividend from an accumulating fund, you not only pay tax on the dividend itself, but also capital gains tax. It is complicated to explain this issue fully, but it is a consequence of the Section 104 pooling rules. I believe that it has been discussed here previously.

solidpro

I get it. Thank you.

dales1

Here's a helpful explainer https://monevator.com/income-tax-on-accumulation-unit/

Note that the notional dividends are an allowable addition to the pool of purchase costs (for CGT purposes) to avoid them being taxed twice.

Middle_of_the_Road

solidpro said:

I get it. Thank you.

Glad you do. The investing world seems extremely intricate, and littered with many avoidable pitfalls that need to be navigated. Not surprising so many are reluctant to start the journey.

BobR64

Middle_of_the_Road said:

solidpro said:

I get it. Thank you.

Glad you do. The investing world seems extremely intricate, and littered with many avoidable pitfalls that need to be navigated. Not surprising so many are reluctant to start the journey.

Though, the sort of issues being discussed here only apply once you have put as much as you can into ISAs and pensions and won't affect the vast majority of people.