FAQ for Tax in the United Kingdom

[PeterKidd]

It’s not up to Trading 212 to give you tax advice. You all have online access to the required information.

If you don’t understand it you need an accountant/ financial adviser to advise based on your personal circumstances

[Richard.W]

@PeterKidd

It’s not up to Trading 212 to give you tax advice. You all have online access to the required information.

What is your point? In this FAQ I say that no broker can advise upon or compute your tax since they do not know your full investment picture, such as what overlap of shares you might hold on other platforms and therefore how that might affect your computation of capital gains.

I am simply explaining the main things that investors need to be aware of regarding tax on dividends and gains, and giving links to the relevant HMRC pages. My intention is be helpful to this community. From personal experience I know that it can be difficult for people who are new to investing to easily discover what they need to know about tax. By reading the right HMRC pages most people should be able to complete their own self-assessment return without needing to hire an accountant.

[EquityInvestor]

@Richard.W

You will need to if you have dividend income above £1,000, or have made capital gains net of losses in excess of £6,0000, or have gains before losses in excess of 4 times that amount (£24,000), or losses to carry forward losses.

Hi Richard, great post as always.
I was having a quick look to see what areas might need updating.
I think this section under the question “How do I report to HMRC?” may need updating.

Specifically:

• As you rightly mention elsewhere in the post, the Capital Gains allowance for this tax year 2024-2025 is £3,000.
• From the HMRC website it seems like the ‘4x Capital Gains allowance’ calculation to determine when reporting is needed even if the capital gains allowance has not been exceeded is no longer applicable. There is however a requirement along the lines of ‘reporting required if total assets sold exceed £50,000’ however this seems to only apply if ‘you’re registered for self-assessment’.

Source: Capital Gains Tax: what you pay it on, rates and allowances: Work out if you need to pay - GOV.UK

Summary

Once again, thank you for providing this great resource.

[Richard.W]

Thank you for spotting that point.

[zenzil]

Hi,

I don’t seem to find a clear answer anywhere on my question.

I’m using T212 Cash interest on my Invest account. Currently, my interest earned are below 1000gbp but if theY were going above 1000gbp, does T212 send my interests earned directly to HRMC or will I need to do a self assesment return just for that ? On the app, it says my cash is held in a bank so banks should send interests to HRMC ?

[Richard.W]

Trading 212 is not involved in paying taxes. If you accrue interest exceeding £1000, I think HMRC is informed about the interest and will let you know. As I read on their web pages, it is only with savings and investment earnings above £10000 that you must be proactive in completing Self Assessment.

[zenzil]

Thanks Richard. Yes indeed, you need to do self assesment when interest earned are above 10000gbp.

[hurma]

@Richard.W

Is the Trading 212 ISA flexible?

No

This needs an update since it seem it is flexible now!
source: Is ISA flexible or not? - #18 by Momchil.G

[Richard.W]

@hurma

This needs an update since it seem it is flexible now!
source: Is ISA flexible or not? - #18 by Momchil.G

I have updated the information about Flexible ISAs.

[Apptimise]

Hi all. Regarding tax-efficiency of Acc vs Dist ETFs,
I’m not seeking financial advice and I understand that taxes are complex and depend on individual circumstances. All I’m trying to do here is run a hypothetical scenario by the experts here to make sure I’m getting it right.

For that, I use the example above about the tax of ETFs, and I will compare Vanguard S&P500 VUSA (Distributed) and VUAG (Accumulated) ETFs to see which one is more tax-efficient (https://fund-docs.vanguard.com/Vanguard_Funds_Plc_ERI_30_06_23.xlsx):

VUAG (Acc): ERI: 1.0589
VUSA (Dist): ERI: 0, Dividends: 0.2642, 0.2596, 0.2856, 0.2749 = 1.0843

Now, the exchange rate will be different on different days, but let’s keep it simple and pick USD/GBP of 0.79 for all the calculations.

UPDATE: I’m updating my question because I noticed I was not comparing the same exact things. In order to do a fair comparison, the number of shares bought/sold multiplied by the buy/sell price should match. That’s what I did, and it looks like the numbers are very close. So, I think it doesn’t matter which version of the ETF you go for. The tax will be quite the same if they are bought and sold on like-for-like dates.:

VUSA (Dist): bought 1000 shares at £63.86, sold 200 shares at £67.59
VUAG (Acc): bought 1027.18 shares at £62.17, sold 202.75 shares at £66.67

Calculations:

Thanks!

[Richard.W]

There have been some past years in which VUSA also has ERI. The fact that an ETF is distributing does not guarantee it has no ERI. One should check.

[Apptimise]

That’s true, @Richard.W. I haven’t clarified that, but in the calculations, it’s actually dividends + ERI (which happens to be zero).

Also, if the ETFs are from different providers, it’s always good to run the numbers and decide. But what I can say is that the income reporting for distributed versions is normally simpler, especially if the ERI is zero, so people might want to consider that as a factor.

[Richard.W]

I agree. I generally use distributing in my taxable account, and accumulating in my tax sheltered ISA.

[Gorski22]

@Richard.W

But beware. The tax shelter is only for UK taxes. If you move abroad and/or become a taxpayer in a different country the profits in your ISA account will be taxed by that country as in any normal account.

What if I move back to UK and then decide to withdraw my Isa accoun?

[Richard.W]

If you are tax resident in the UK then the ISA will operate as normal.

[TonyL7]

@Richard.W Hi Richard, I had a quick question about the CGT calculator you linked (Which looks great). It talks about currently showing in GBP. I have most of my trades in USD and converted to GBP via Invest.

To get an accurate calculation, would I convert the Share price (which in the T212 output CSV is USD) to GBP first, or do I leave it in as USD for both sells and buys? Just a bit confused on that point. Thx

B/S	Date	Company	Shares	Price	Charges	Tax
B	12/01/2004	AVG	10000	0.525	10.0	26.25
S	23/02/2004	NCH	5000	1.75	12.50	0.0

[Richard.W]

You need to convert between USD and GBP using the exchange rate on the day of trade. A share bought for $100 and sold for $100 some days later can show a GBP gain or loss, depending on whether GBP weakens or strengthens against USD, respectively. You can be taxed purely on currency gains, or create losses to set against other gains. So you should convert the value of all trades to GBP before using the calculator.

I get myself a table of past daily exchange rates using the Googlefinace function in Google sheets.

[TonyL7]

Thanks Richard. So, just so I am clear, I get that for the RESULT that is given by Trading 212 (in the CSV) but to use the calculator, the only fields you could convert to GBP are Price, Charges and Tax (as the calculator is essentially determining the result (profit/loss) for the trade, which will differ from the Trading 212 CSV as that isn’t looking at Share Matching.

So, I think for anything I have trades in USD (only foreign currency I traded in), I would convert the PRICES (column 4) for each row (buys and sells) to GBP using the daily exchange rate you mentioned, and then let the calculator work out the result (with share matching)? Does that sound right?

[TonyL7]

Sorry, also, when you mention the daily exchange rates, I assume you’re using a daily rate (not trying to find it based on timing of the trade intraday?

Thanks in advance for your help. Never had to consider CGT before, so it’s all a bit daunting.

[Richard.W]

That’s right. HMRC do not lay down a firm rule as to what fx source to use. You only need to be consistent. So the ones reported once a day via Googlefinace will be fine.

I use

=GOOGLEFINANCE(“USDGBP”, “price”, “01/10/2023”,“31/03/2025”)

to produce a table of fx rates between two dates