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Dividend Income

AlanP_2
Posts: 3,523 Forumite


A quick, and probably, straight forwards query.
For the first time we are going to invest in to a GIA and I'm trying to get my head around whether the income will be interest or dividends.
A Money Market fund will be interest, I get that, but what about Bond Funds? Is the income form those classed as interest or dividends?
My thinking is interest so if it is what about the likes of Personal Assets or Capital Gearing?
BTW - It's dividends I want not interest and the timescale is short in as much as it will move across to an ISA in April.
Thanks
For the first time we are going to invest in to a GIA and I'm trying to get my head around whether the income will be interest or dividends.
A Money Market fund will be interest, I get that, but what about Bond Funds? Is the income form those classed as interest or dividends?
My thinking is interest so if it is what about the likes of Personal Assets or Capital Gearing?
BTW - It's dividends I want not interest and the timescale is short in as much as it will move across to an ISA in April.
Thanks
0
Comments
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If the fund holds 60% or more of its assets in bonds, it's taxed as interest.
Tax on dividend income and capital growth - Aviva
The fund should tell you which, if it's unclear (I believe Vanguard keeps their LifeStrategy 40 fund at just over 40% shares, so that it's taxed as dividends - but check if you do choose it).0 -
EthicsGradient said:If the fund holds 60% or more of its assets in bonds, it's taxed as interest.
Tax on dividend income and capital growth - Aviva
The fund should tell you which, if it's unclear (I believe Vanguard keeps their LifeStrategy 40 fund at just over 40% shares, so that it's taxed as dividends - but check if you do choose it).If domiciled in Britain then it can be a dividend but ITs can also pay interest so you need to check the declaration.If the IT is domiciled abroad e.g., some debt ITs are domiciled in Jersey and Guernsey then it's the 60% test you mention in your post (see the Foreign Notes for SA).
PNL is domiciled in Britain - has a GB ISIN - and it's most recent dividend was declared as a dividend so I wouldn't class that as interest.
Capital Gearing is also domiciled in GB but its most recent dividend declaration has the gotcha you need to watch out for:
https://www.londonstockexchange.com/news-article/PNL/dividend-declaration/17142460
https://www.londonstockexchange.com/news-article/CGT/dividend-declaration/17058969
https://www.gov.uk/government/publications/self-assessment-foreign-sa1061 -
AlanP_2 said:A quick, and probably, straight forwards query.
For the first time we are going to invest in to a GIA and I'm trying to get my head around whether the income will be interest or dividends.
A Money Market fund will be interest, I get that, but what about Bond Funds? Is the income form those classed as interest or dividends?
My thinking is interest so if it is what about the likes of Personal Assets or Capital Gearing?
BTW - It's dividends I want not interest and the timescale is short in as much as it will move across to an ISA in April.
Thanks
You should note there are fundamental differences between unit trust funds ( OEICS) and Investment Trusts (such as Capital Gearing and Personal Assets).
Irrespective of an Investment Trust's core holdings, any income distributions are always dividends liable to tax at dividend rates.
So in the case of Twenty four select Monthly income, an investment trust wholly invested in bonds and bond derivatives, the monthly distributions are dividends.
Accordingly, if you are solely interested in receiving dividends ( rather than interest) you can't go wrong with Investment Trusts.0 -
poseidon1 said:
You should note there are fundamental differences between unit trust funds ( OEICS) and Investment Trusts (such as Capital Gearing and Personal Assets).
Irrespective of an Investment Trust's core holdings, any income distributions are always dividends liable to tax at dividend rates.
So in the case of Twenty four select Monthly income, an investment trust wholly invested in bonds and bond derivatives, the monthly distributions are dividends.
Accordingly, if you are solely interested in receiving dividends ( rather than interest) you can't go wrong with Investment Trusts.Eco Miser
Saving money for well over half a century0 -
HICL, domiciled in the UK, pays part dividend and part interest0
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poseidon1 said:AlanP_2 said:A quick, and probably, straight forwards query.
For the first time we are going to invest in to a GIA and I'm trying to get my head around whether the income will be interest or dividends.
A Money Market fund will be interest, I get that, but what about Bond Funds? Is the income form those classed as interest or dividends?
My thinking is interest so if it is what about the likes of Personal Assets or Capital Gearing?
BTW - It's dividends I want not interest and the timescale is short in as much as it will move across to an ISA in April.
Thanks
You should note there are fundamental differences between unit trust funds ( OEICS) and Investment Trusts (such as Capital Gearing and Personal Assets).
Irrespective of an Investment Trust's core holdings, any income distributions are always dividends liable to tax at dividend rates.
So in the case of Twenty four select Monthly income, an investment trust wholly invested in bonds and bond derivatives, the monthly distributions are dividends.
Accordingly, if you are solely interested in receiving dividends ( rather than interest) you can't go wrong with Investment Trusts.
From the Foreign Pages Notes 2025:
0 -
wmb194 said:poseidon1 said:AlanP_2 said:A quick, and probably, straight forwards query.
For the first time we are going to invest in to a GIA and I'm trying to get my head around whether the income will be interest or dividends.
A Money Market fund will be interest, I get that, but what about Bond Funds? Is the income form those classed as interest or dividends?
My thinking is interest so if it is what about the likes of Personal Assets or Capital Gearing?
BTW - It's dividends I want not interest and the timescale is short in as much as it will move across to an ISA in April.
Thanks
You should note there are fundamental differences between unit trust funds ( OEICS) and Investment Trusts (such as Capital Gearing and Personal Assets).
Irrespective of an Investment Trust's core holdings, any income distributions are always dividends liable to tax at dividend rates.
So in the case of Twenty four select Monthly income, an investment trust wholly invested in bonds and bond derivatives, the monthly distributions are dividends.
Accordingly, if you are solely interested in receiving dividends ( rather than interest) you can't go wrong with Investment Trusts.
From the Foreign Pages Notes 2025:
I hold SMIF ( hence the specific reference ), on my GIA consolidated year end tax certificates ( from HL and II ) all distributions classified therein as 'Overseas Dividends' to be declared as such on the supplementary self assessment form SA106.
However, was a little surprised to see 1 or 2 trusts ( eg Capital Gearing) have the power to make hybrid distributions comprised of interest and dividends, where ( as in the case of Capital Gearing) a significant corporation tax advantage can be gained by doing so.
Therefore I retract my statement ( unreservedly), that all Investment Trusts are a safe haven for dividend income if that is a specfic investor's requirement ( you live and learn!).0 -
Thanks all, and there was me thinking I'd asked a simple question with an obvious answer that just hadn't registered with me.
Naive on my part really given UK tax rules
I think I'll use City of London (CTY) as adding a bit more UK exposure aligns with our target geographic allocation.0 -
poseidon1 said:wmb194 said:poseidon1 said:AlanP_2 said:A quick, and probably, straight forwards query.
For the first time we are going to invest in to a GIA and I'm trying to get my head around whether the income will be interest or dividends.
A Money Market fund will be interest, I get that, but what about Bond Funds? Is the income form those classed as interest or dividends?
My thinking is interest so if it is what about the likes of Personal Assets or Capital Gearing?
BTW - It's dividends I want not interest and the timescale is short in as much as it will move across to an ISA in April.
Thanks
You should note there are fundamental differences between unit trust funds ( OEICS) and Investment Trusts (such as Capital Gearing and Personal Assets).
Irrespective of an Investment Trust's core holdings, any income distributions are always dividends liable to tax at dividend rates.
So in the case of Twenty four select Monthly income, an investment trust wholly invested in bonds and bond derivatives, the monthly distributions are dividends.
Accordingly, if you are solely interested in receiving dividends ( rather than interest) you can't go wrong with Investment Trusts.
From the Foreign Pages Notes 2025:
I hold SMIF ( hence the specific reference ), on my GIA consolidated year end tax certificates ( from HL and II ) all distributions classified therein as 'Overseas Dividends' to be declared as such on the supplementary self assessment form SA106.
However, was a little surprised to see 1 or 2 trusts ( eg Capital Gearing) have the power to make hybrid distributions comprised of interest and dividends, where ( as in the case of Capital Gearing) a significant corporation tax advantage can be gained by doing so.
Therefore I retract my statement ( unreservedly), that all Investment Trusts are a safe haven for dividend income if that is a specfic investor's requirement ( you live and learn!).
In my experience brokers don’t look into the nuances and sometimes even miss the obvious e.g., this year CMC Invest has classified all my GB and foreign domiciled IT and Irish ETF dividends as UK unit trusts. Apart from this being hopelessly wrong it doesn’t even offer OEICs/Unit Trusts… It also classified a LSE listed foreign company’s dividend as a UK dividend.
i don’t use broker tax certificates to complete my SA, I keep my own records and make my own, more accurate, classifications.0
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