I was just wondering if there is any taxes on etf becz i wanna buy etf just needed to know that there ia any capital gains ot other sort taxes that i need to pay currently im looking to buy Vanguard S&P 500 ETF
I don’t think there’s any. Well not in an isa any way
Wht about in in capital gains free allowance
Gains and dividends from VUSA are treated exactly the same for tax as gains and dividends on a stock. The only difference is that
there is no US withholding tax, and so no foreign tax credit can be set against UK dividend tax.
there is additional Excess Reportable Income (ERI) which is taxable in addition to the four quarterly dividend payments. You look up information on the Vanguard web site and find this entry for VUSA:
This shows that if you hold shares of VUSA in a taxable account then there is taxable income per share in USD from payments on four dates,
plus “excess of reportable income over distributions” of $0.0394 per share which is treated as paid in 31/12/19.
If you are a UK taxpayer you will probably need to look at two different reports to find the dividends that were paid in a given UK tax year. You are supposed to convert the USD amounts to your local currency using the exchange rate that was current on the day dividend was paid.
You have no worries if your investment is in an ISA, or if it is outside an ISA, but your dividends are less than £2,000 and capital gains less than £12,300, under current legislation.
The hassle of excess reportable income reporting is one reason I like to hold my ETFs inside an ISA. However, I have noticed that iShares now have no excess reportable income on most of their distributing ETFs and this helps to simplify tax reporting. Eg IUSA S&P 500 ETF has no excess reportable income
See the Literature section here, and read the report called “iShares Plc - Reportable Income 2020 (English)”
All accumulating ETFs all have excess reportable income that a UK taxpayer should declare. I expect there are many people who do not realise this.
So basically just use an isa for etfs
Yes. There are also tax advantages. For someone who does pay dividend tax it is more tax-efficient to put a high yielding ETF in the ISA and dividend-paying US share in taxable Invest account, rather than the other way around. The savings on tax will be greater.
However, I would not shy away from using ETFs in an Invest account entirely. After you have done the tax reporting once, you will find it is not too hard to do correctly.