@regional11 I have looked into REITs more and found the information I was lacking before.
The UK does not have any witholding tax so there is nothing to get exemption for on that front. they have the PIDs instead which fall under income tax for regular investers hence the 20% at basic rate, with those who earn more paying larger % on their PID (higher rates at 40% and additional at 45%), alongside whatever portion is paid as dividends. ISA accounts won’t face these taxes and will receive the gross payment.
Many places use the Term “withholding tax” for UK companies out of convenience due to being easier to understand internationally.
The ISA does what it says on the wrapper and should protect payments to you from any and all taxes by the HMRC. so holding a UK REIT in an ISA ensures all money paid to you is received by you. either directly or through reclaiming tax from the HMRC.
It is always more advantageous to trade within an ISA when the option is available, as the only restriction is how much you can deposit each tax year.
my suppporting source: https://www.sharesmagazine.co.uk/article/reducing-dividend-tax-the-reit-way
If you hold British Land Company, LSE: BLND in an ISA account and they paid a gross dividend of 40p in PID+dividend, you will receive all 40p. it depends on your ISA manager whether payments will be received gross, or net with taxes reclaimed and paid up to 8 weeks later. but you will get all of it.
the most advantageous share to hold in an ISA is a REIT because the company doesn’t first have to pay a 19% corporation tax and you don’t need to pay any taxes on the dividends/PIDs paid to you from the remainder.
ISA’s only count the money you pay in to your allowance, and not the amount your receive in payment, whether that is £20 or £20,000,000. you don’t pay any tax on money earned inside an ISA, whether that be capital gains, dividends or PIDs. PIDs just often have the uncertainty regarding when you will receive the full payment.
to know specifically, we would need to ask T212 how they handle PIDs inside ISAs.