Do you need to declare dividends taken as shares?

Gary-S_2 · 5 September 2016 at 10:13AM

Hi all,

Just looking for some general advice as someone about to take their first (small) step into the stock market.

I will be opening an online trading account today, and where possible taking any dividends as further shares to hopefully help build my portfolio.

I understand that tax needs to be paid on dividends exceeding £5,000, however is this only if being taken as cash?

So (basically) my question is do dividends still need to be declared when taken as shares or do I just declare capital gains tax (where applicable) when it comes to selling them?

I'm not trying to avoid tax I just don't want to pay it unless I gave to. I'm already self employed and registered for self assessment if that affects the answer.

[Deleted User] · 5 September 2016 at 10:17AM

Yes

https://forums.moneysavingexpert.com/discussion/5519284

Gary-S_2 · 5 September 2016 at 10:25AM

Thanks, I thought that may be the case but I'm more familiar with accounting for actual products so wanted to be sure.

TheCyclingProgrammer · 5 September 2016 at 1:14PM

Think of it as no different to having been paid the cash value and then using that cash to buy more shares. You're just missing the intermediate cash transfer step, it makes no difference to the tax treatment.

Fortunately the tax rate on dividends after the £5k allowance if youre a basic rate payer is only 7.5%.

p00hsticks · 6 September 2016 at 8:02AM

Is there any reason why you can't deal within a S&S ISA ? THat way you donlt have to worry about keeping track of dividend income, capital gains etc as it's all tax free - it saves a lot of hassle

Gary-S_2 · 6 September 2016 at 8:18AM

Hi p00hsticks,

At the moment I already use a (4%) help to buy ISA so cannot use another. Plus although debt free (other than using a credit card for things I'd be buying anyway and paying in full to build a history), I cannot make regular investments at the moment to make the most of ISA limits so for now this seems to be the best option.

Though thanks for the suggestion.

xylophone · 6 September 2016 at 10:49AM

At the moment I already use a (4%) help to buy ISA so cannot use another.

You can only save a limited amount into the HTB during the tax year.

You can pay up to the balance of your ISA allowance for the year into a stocks and shares ISA.

Gary-S_2 · 6 September 2016 at 11:54AM

xylophone wrote: »

You can only save a limited amount into the HTB during the tax year.

You can pay up to the balance of your ISA allowance for the year into a stocks and shares ISA.

Agreed and understood, but like I said:

"I cannot make regular investments at the moment to make the most of ISA limits so for now this seems to be the best option."

So maybe at a later date, however a worthy note to anyone else reading.

Do you need to declare dividends taken as shares?

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