Tracker Fund Tax?

nottingham13

Hi

do you have to pay tax on a tracker fund outside of an ISA? (When you sell it)

Thanks

dunstonh

Assuming it is unwrapped (you only mention ISA and not any of the other tax wrappers), then you are potentially liable to capital gains tax. The income (dividends) are potentially liable to income tax but providing you are not a higher rate taxpayer or the dividends dont take you into higher rate then you will have no further liability for income tax.

nottingham13

Thanks for your reply,

So in simple terms say if I was a basic rate tax payer and had a unit fund outside of an Isa, if I recieved a dividend, the tax would already have been taken off and I wouldnt have to declare any thing to the tax man?

dunstonh

nottingham13 wrote: »

Thanks for your reply,

So in simple terms say if I was a basic rate tax payer and had a unit fund outside of an Isa, if I recieved a dividend, the tax would already have been taken off and I wouldnt have to declare any thing to the tax man?

Correct. You would mention it only if you got a tax return to complete but it would not add to your tax bill but be information only. In a similar way interest on bank accounts is taxed.

Only if the dividends, when added to your income, took you into higher rate territory or you are over 65 and earning near to or over £21,800 would you need to declare them to the HMRC with or without a tax return.

cheerfulcat

dunstonh wrote: »

Only if the dividends, when added to your income, took you into higher rate territory or you are over 65 and earning near to or over £21,800 would you need to declare them to the HMRC with or without a tax return.

Bearing in mind that you need to use the gross dividend - that is, the dividend itself + the associated tax credit - for this calculation.