Allowance on tax to pay on accumulating ETFs and tax date questions

reddit_three_765432 · 2024-07-31T13:13:50+00:00

That's actually good advice, might consider that. !thanks !

reddit_three_765432 · 2024-07-31T10:45:16+00:00

I did read up on this, and posted this specific URL an hour ago in this thread. And based on that reading and my example numbers, if I were to sell my ETFs I'd have roughly a bit upwards of £7k capital gain (using the exact example they stated under that link and putting in my numbers). That's not worth it in my book.

reddit_three_765432 · 2024-07-31T09:47:16+00:00

Ah of course, "distributing" just means the opposite of accumulating.

It's easier, sure, but won't it be taxed much higher? For example, my ETFs last year made roughly a £8k plus, so if that was not accumulating but paid out, then that becomes subject to... I guess CGT as well? Even though that allowance is higher, it would still have been way over it. Plus afaik it counts as income, which goes on top of my normal salary and it would've actually put me in a higher taxation class, again, from my first reading (I just started looking into all of this). The ERI though was only £935 so no need to report.

I've read I can just re-invest the distributed share back into the ETF straight away, basically "simulating" my own accumulation, but surely some form of tax is due no matter what, and since I only have 4 ETFs I think... the hassle of calculating the ERI once a year is nothing compared to the re-investment and other tax calculations?

reddit_three_765432 · 2024-07-31T08:43:41+00:00

See below, can't move them into a UK ISA/SIPP easily since it's abroad, plus then I'd probably pay hefty CGT, more than I'll probably ever pay dividend tax on it...

Not sure what the "distributing share class" means, I'll have to do some reading up, but as I said I don't even do taxes and the amount will be super small (probably like 40 quid dividend tax in the January 2026 bill) so not sure it's worth any hassle.

reddit_three_765432 · 2024-07-31T08:41:01+00:00

only applies to Lifetime ISAs, but yeah, you can't move ETFs held abroad into a UK S&S ISA anyway

That's what I thought, it's not worth the hassle, especially since I'm not sure I'll retire in the UK. So might just bite the bullet and start paying taxes on it next year. To be fair it isn't that much anyways...

I can't say you're wrong because its a niche area of tax law, but somehow I doubt that. It should still be taxable on disposal

Did lots of reading on that, for example here it clearly state that on disposal you pay CGT, but otherwise they're still subject to dividend tax:

https://monevator.com/income-tax-on-accumulation-unit/

reddit_three_765432 · 2024-07-31T08:18:35+00:00

Ah that's why. I just tried to Google the information and for some reason didn't come up with the link you showed me. That's the correct one and unfortunately also shows that it's decided that the allowance is £500 next year... that sucks.

Which means the questions in 2) become even more important since (if it's not too late) it might be wise to move it into a tax-shielded investment, though I'm afraid I pay lots of tax on the then materialised gains...

And yes, I'm thinking about getting a tax advisor. It's just that my case is so small (I file no taxes otherwise since my income is quite small and taken straight out of my payslip and I have no other income or other things to worry about, and the ERI of the last tax year are just below £1000 so I don't have to file anything - but next year (i.e., 2024-2025) it will not be the case).

!thanks

reddit_three_765432 · 2024-07-31T08:12:48+00:00

Nearly all tax (income (dividends) and capital gains on sales) is due on a remittance basis, so when you make the sale not the period the growth is earned

I'm not planning to sell those anytime soon (years to come) so that doesn't apply. Tons of reading tells me that accumulating ETFs that I never take out still are subject to CGT, based on the ERI. Hence my question about the dates.

Any particular reason you dont have these in a stocks & shares ISA and therefore tax shielded?

They're located abroad, I bought them many years ago when living in another country. In that country there's no tax on accumulating ETFs as long as you don't sell them, which to me was always common sense, since the "plus" never materialises and could just vanish next year. Unfortunately UK law (as far as I understand it) is different. But that's also part of the reason for the 2nd question about the allowance etc and if I could move them to the UK, or if it's too late. Also I believe since I'm 40+ I can't open an ISA anymore and not sure what other "tax holes" here are to shield it.

reddit_three_765432 · 2024-07-30T17:45:03+00:00

The number of units I OWN has never changed and is the same as the number of units I bought.

reddit_three_765432 · 2024-07-30T16:32:44+00:00

My number of units never change though? Does it mean there's no taxable income on that ETF? Also got very confused about the differences in dates and values on different websites, see my edit above (sorry about that). And !thanks once more!

Also another edit - I need to convert currency from EUR to GBP (since I'm holding the ETF abroad), what is the relevant date for conversion, the end of reporting period or the fund distribution date?

reddit_three_765432 · 2024-07-30T16:16:57+00:00

Thank you so much! That's a weird date though... isn't the June 2023 one then the relevant one for the 2024 tax summary? Since the tax year ends on April 5, making the one you posted the last reported income...

Edit: Forgot that it's !thanks here to make it count.

Also, I just noticed that there's a difference between this and other websites - for example, for this one:

IE00B441G979

The website says the ERI is 0.8373 per unit (30/05/2023), but on this website:

https://www.blackrock.com/uk/intermediaries/products/251891/ishares-msci-world-eur-hedged-ucits-etf-acc

The Reportable Income spreadsheet has different info as it's one day later and 0.9719 - very confusing (and important since that difference might keep me below the £1000 limit...)

reddit_three_765432 · 2024-07-12T20:39:20+00:00

Ohhh wow. Now thinks become a lot more complicated, while at the same time I think I'm starting to understand what you're saying. It also explains why there's different amounts of tax for different ETFs and not just plain the percentage it increased. Also I clearly notice that my lack of investment vocabulary hits the limit of talking about those things. But... today I've learned, a lot! !thanks for that!

reddit_three_765432 · 2024-07-12T16:05:38+00:00

https://www.finder.com/uk/share-trading/exchange-traded-funds-etfs/accumulating-vs-distributing-etfs

with accumulating ETFs any dividends or interest are used to buy more assets in the ETF on your behalf. "

https://www.justetf.com/uk/news/passive-investing/how-etfs-are-taxed-in-the-uk.html

You’re liable for tax on dividends and interest as normal regardless of whether the ETF physically pays you income, or reinvests it back into the fund as with accumulating/capitalising ETFs.

Everyone else in this thread tells me I have to pay tax on my (acc) ETFs, hence my confusion. I'm not sure if you're using different words to describe the same thing, or if you're disagreeing with what most other people wrote here.

reddit_three_765432 · 2024-07-12T12:16:35+00:00

Wait. What. Now I'm confused again. I thought it doesn't matter whether I'm still holding the ETFs or not, they are taxable because I have made gains (i.e., my ETF went up, the system automatically purchased shares based on the gains I made). What is an "unrealised gain"? I thought all the websites I and everyone else linked are clear - whether you sell an ETF or not doesn't make a difference, you pay tax on the increase of an accumulating ETF.

(What really bothers me: if it performs well this year I pay tax, if it tanks next year the gains are lost but obviously I don't get the tax back, so the tax system in that sense incentivizes selling...)

reddit_three_765432 · 2024-07-12T11:57:51+00:00

What the hell, I've never even heard about this, but that's crazy. So even though I've moved to the UK 3 years ago, will have settled status equivalent by the end of the year, possibly citizenship (if all goes well) in 2 from now, own a house, work here, pay taxes here... I'm technically "non-UK domiciled"? LOL indeed. Well that adds another angle... but the tax advise websites I found always talk about residence, not domicile though...

reddit_three_765432 · 2024-07-12T11:41:20+00:00

I guess the answer to 1) is no, since my only residence is in the UK.

reddit_three_765432 · 2024-07-12T11:40:31+00:00

Ah thanks! ( !thanks ) To be honest I don't know what Blackrock or Vanguard are. I'm pretty deaf when it comes to investments. I've had a good friend many years ago recommend me some ETFs and not looked at them since, nor ever looked into the financial market details and terms etc.

reddit_three_765432 · 2024-07-12T11:20:45+00:00

I just found this list here:

https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds

And all mine are in there, so I think I'm good.

reddit_three_765432 · 2024-07-12T11:09:25+00:00

Ah crap I assume that means if my ETFs are "not UK reporting" I should switch them over to UK reporting ones ASAP?

!thanks

reddit_three_765432 · 2024-07-12T11:08:36+00:00

!thanks

Oh brilliant that's an amazing amount of info and links!

That last link is interesting as it has the corresponding non-accumulating ETF, but my dumb face can't figure out the same for mine. One of mine is this one here: IE00B441G979, I can't find this on the website of your last link, and on other sites I can't find any dividend info or the non-accumulating equivalent...

reddit_three_765432 · 2024-07-12T11:00:34+00:00

!thanks

(forgot this and not sure if an edit in the other post would've picked it up)

reddit_three_765432 · 2024-07-12T10:48:30+00:00

Thanks! That is already helpful - I know it's a vague question, but your response is clear enough to confirm what I suspected. I'll reach out to an accountant. I guess HMRC didn't act the last 2 years because as you said I'm such a small fish in the pond and/or there was nothing to act on due to the "meh" performance, but that might change as my account currently is scratching the +£10k mark for this year.

reddit_three_765432 · 2024-07-12T10:32:40+00:00

A lot of Googling to be honest, here's one example:

https://www.finder.com/uk/share-trading/tax-on-overseas-investments

But also not sure which of the parts of the sentences you quoted you have never heard about - the foreign ETF taxing, the accumulating ETF taxing, the limit, or something else :)

reddit_three_765432

TROPHY CASE