Tax on US stock dealing

Hi

Please can someone help me clarify if we endup paying taxes for US shares that we hold in:

  1. ISA accounts
  2. Personal investing account

?

Thanks
Alisha

Hi Alisha,

As i understand it, the ISA does not protect you from taxes outside the UK. So you would still have to pay tax on the US shares.

Thanks
Sam

Thanks Sam,

Does platform automatically deducts it or do i have to get in touch with tax accountant?

If you are a UK taxpayer then… In an Invest account you are responsible for computing and paying your own dividend and capital gain taxes. It is not difficult. If you are numerate enough for DIY investing you can also do DIY tax reporting. There is lots of well presented information on the HMRC website.

Start by reading about the annual tax free allowances for dividends and capital gains.

If you exceed those limits a self assessment tax return will be needed.

The witholding tax on US shares is deductible from what you own in UK tax.

Thanks Richard. Now its clear to me that for Invest account any profit i make on US shares is deductible from within my UK taxes.

I dont however pay any tax in the UK for ISA profits. My question is (and i think SAML kind of answered it) do i have to pay taxes separately for ISA profits to the US authorities because those profits were coming from US stocks?

Platform doesn’t provide a way to filter out between US and the uk trades, so i can use my tiny numerate brain to segregate the profits/losses based on countries.

Thanks

The withholding tax is only in reference to dividends right? This tax is automatically taken by trading212. The ISA won’t protect you from this tax as it is a tax from the U.S. I believe that capital gains taxes do not need to be paid to the U.S and just to the UK government, and if these capital gains were obtained within an ISA or were below the maximum capital gains allowance, again not taxes are to be paid. I’m not completely sure but this is how I believe it is

Both in ISA and Invest accounts a 15% tax is automatically deducted from dividends arising from US stocks. This tax deduction, when occurring in Invest account, can be credited against UK dividend tax owed on those same US dividends occurring in Invest account (if your UK dividend tax rate exceeds 15% - it can be 0%, 15%, 32.5% or 38.1% depending on your total income).

Capital gains in Invest account, whether on US and/or UK shares, are only subject to UK tax. They have to be figured separately for each company in which you incur a capital gain or loss.

A proper understanding of intricacies of tax in investment income is impossible to learn from a the Trading 212 community forum alone. There is lots of well-explained information on the HMRC website. If you are planning to earn dividends and make capital gains (and losses) then you need to study the HMRC pages or hire an accountant to help

Many thanks Cavanhagan and Richard.

HI
This is my first post and I too have a question about this as I can’t seem to find a super clear answer or direct answers from the Gov.uk website. Any links or guidance would be great.

As I understand it if I currently hold a UK ISA account and I want to buy for example Amazon.

  • I first need to make sure the W8ben is complete
  • I then purchase the shares and are subject to that days currency exchange rate from GBP to USD
  • If I get dividends, I pay only 15% to the UK government. Is this automatically withheld by Trading212 and send to the Gov. Or do I need to do my own taxes at the end of the year and keep track of my foreign dividends and take it up with the GOV and pay what they tell me?
  • I decide to sell Amazon at a profit, it gets converted back the GBP at that days rate and because it is help in an ISA i do not have to worry about the gains I made on selling the shares? or do I also need to check with the GOV to see if I am above or below the tax level for the gain I made? or because it is in an ISA, I only have to worry about dividends from US companies?

Does that makes sense? am I right or way off? Any guidance or links to the right pages with the right information would be great. As I would like to know what I need to do in the future before I buy today.

Also if there is any good information to explain the possible losses and gains to foreign exchange on US stocks that would be great. As I would like to have a better understanding of how the USD to GBP changes could affect my gains and losses.

Many many thanks.

1 Like

W8ben is automatically submitted when you created your account or when you buy your first $

I think if it’s in an ISA any gain is tax free regardless of currency or exchange.

I would like to have clarification too.

1 Like

For US dividends, provided you opted to complete the W-8BEN, the UK-USA treaty means that 15% tax is deducted at source. The dividends you receive in your ISA are net of tax.

As for your last point, any profit earned inside of your ISA does not have to be declared. That is essentially the benefit of holding the ISA; no CGT on £20,000 of ISA deposits for the tax year.

Thank you for your answer. So that would be true doe US stocks? If I was to buy them within my ISA and have a W8BEN completed. I pretty much dont need to do anything. The tax will be deducted before I see it and I wont pay CGT on any amount made on the stocks.

At the end of the year I wont need t worry about any UK tax documentation in addition to my normal taxes?

Yes, if you’ve recently opened your T212 account the W8BEN form would be completed for you. If your account is fairly old you may have to do it manually, and I would just context them about it. And yeah since the ISA is tax free for deposits up to £20,000, you don’t have to worry about declaring it anywhere unless you deposit more that this. ISAs are very easy to keep on top of. Just to note though, you have a £20,000 total ISA allowance, not £20,000 for each ISA type. So if you have a cash ISA for example, the deposits you’ve put in this year will count towards your allowance. Hope this helps.

Thanks again for the reply.
The reason I am asking about the US stocks is because previously I have had my ISA with HL which has been fine for UK based stocks and funds. Due to the £69 transaction cost to buy US shares, I never really considered it for the amount of money I can invest. Simply too expensive. Now that I can trade on Trading212 for free for US stocks, it is now a possibility. However I just find the information (like most tax information) isn’t as straight forward as I wanted. I don’t want to worry about needing or doing extra tax planning at the end of the year due to holding US stocks. But from the sound of it I just need to keep it in my ISA and not worry as it will all be done for me through the W8BEN at the source.

If anyone has proper government or websites that could go over the details clearly that would be great.

Many thanks

That is correct. You don’t really need to look at HMRC website. But if that would put your mind at rest you could read here