I just realised that for UK residents with a trading account outside of an ISA or SIPP wrapper, it’s preferable to hold “distributing” ETFs instead “accummulating” ones, since both will taxed the same way abd the latter distributions are more complicated to keep track of: https://monevator.com/income-tax-on-accumulation-unit/
Could you please also add VWRD, which is the distributing version of VWRA?
It is basically the same as VWRL (already on Trading212), only that it is traded in USD instead of GBP:
This report says that these USD per share dividends were made in the accounting period 1 July 2017 to 30 June 2018:
0.1822 21/09/2017 (goes on 17-18 UK tax return)
0.2068 21/12/2017 (goes on 17-18 UK tax return)
0.2075 22/03/2018 (goes on 17-18 UK tax return)
0.2028 21/06/2018 (goes on 18-19 UK tax return)
However, there is also listed a $0.0442 per share “Excess of reportable income over distributions”. In a UK taxable account you are meant to pay tax on this as a taxable dividend. If you held 1000 shares, this would be $44.20. You would pay dividend tax, and then increase your basis cost for these shares by $44.20. This is deemed paid 31/12/18 so needs to go on the 2018-19 tax return, converting to GBP at the exchange rate of 31/12/18. So the paperwork is very similar to that for an accumulation fund like VWRA or VWRP.
Having said this, I struggle to find on the Vanguard web pages the tax reporting information for an accumulation fund such as VWRA/VWRP. Perhaps I am meant to find it by adding up the five figures above report for WVRL?
For ETFs that come in only an accumulation type, like VVOL, the report does give a figure.
I would be very interested in further discussion of these points.
I think you may have the answer! These accumulating ETFs were launched by Vanguard on 14 May 2019, so first tax reporting information will not come until the summer of 2020. I would expect Vanguard to publish similar information to that which iShares publishes for its long-existing accumulating ETF SWDA.
I expect many people fail to do the tax reporting of these ETFs correctly. My experience is that platforms do not provide this information to customers and so investors are left to look it up on the ETF issuers’ web sites, where it is often not easy to find.
On a related tax point, I wonder how many people are aware that ETFs such as S&P 500 trackers VUSA, CSP1, pay 15% US witholding tax on dividends, reducing the dividend yield. This means that, at least in principle, I can get a better yield by investing directly in US companies. I have to l pay the 15% US witholding tax on the company dividends, having lodged a W-8BEN, but can then take that US tax a foreign tax credit agaimst my UK tax of 32.5%. By comparison, it is not possible to gain any foreign tax credit with the ETF so I end up receiving after tax only 0.85 x 0.675 = 0.57375 of the company dividends accruing to the ETF. This explains why the yield on S&P 500 is 1.85% but VUSA yields only around 1.5%. Part of the reduction is Vanguard’s 0.07% fee, but mostly the shrinkage is due to the 15% US tax.