I tried searching before adding this topic but couldn’t find it had been covered already.
If you buy a REIT in your T212 ISA, just as an example Supermarket REIT, how does it work with the Property Income Distribution (PID) Dividend/Tax? Does the dividend get paid 100% into the account because the ISA has already been taken into account? Does it get paid 80% with T212 having to re-claim it to pay into your account on a later date? Or does the tax not get reclaimed at all by T212?
Also, have I understood correctly that if you have already added your entire £20,000 for the ISA tax year that you will then have to pay the PIDs anyway? (I.e. it is not counted in the same way as the dividends from other stocks because it’s classed as a “property tax”?).
(Background - reason I’m asking is because my previous provider was so convoluted in their reclaims, the reclaims took many months and you weren’t even notified about them being paid to you so you had to check them manually by ordering specific bank statments to scrutinise. Worse still the payments weren’t labelled by REIT or time of payment in the statements so it was an absolute pain in the neck to marry them up. This made me decide not to invest in REITs anymore, however, if it works better with T212, I’ll reconsider).
We pay property income distributions in 100% gross amount with 0% tax to ISA shareholders. On the other hand, such dividends are taxed 20% if held in an Invest account.
There is a property allowance of up to £1,000 that you can read more about on HMRC’s website here. Still, if this doesn’t quite answer your questions, it will be best to contact them through their helpline.
Thank you so much for the full and very useful reply Momchil. Great the T212 distribute 100%, makes it very simple. Also, I had no idea about the property allowance so thank you very much for that information too.