Scumbag

Right...I'm all ISA'd up, and have still got a few grand to play with (and no, it's not going on another car...not yet, anyway)

I've only invested in managed funds via ISAs, so have never really worried about the tax implications...however I'm now thinking of putting some more into 'Emerging markets' or something similar (yet to be fully investigated, but it's been doing very nicely in my ISA)

However - I'm keen to know where I stand on the tax front.
Let's say I invest £10k in a fund, receive £500 in dividends (automatically re-invested), and the value of the fund goes up 25% (ie value of fund = £13000) at the end of the year. How does the tax work?

Is it:
(i) I pay no tax until I sell, and if the £3000 I have made in the year, added to any other capital gains I have made is less than the threshold amount for CGT, then I dont pay any tax. Obviously if I keep it for lots of years I'll eventually come a cropper with the CGT if I sell all at once
(ii) I get taxed as income on the £500 dividends, and as (i) for the rest
(iii) er...something else

(and I know I'm not taking into account the management charges, but I'm trying to keep it simple)

Any help gratefully received
SB

Jonathan Davies

Just like shares really (unless you're talking about tax-transparent vehicles like limited partnerships - they're slightly racy for private investors but not unusual in property investment).

Your divvies will be subject to income tax in your hands - but they'll probably be paid net of basic rate tax, with a tax credit. Higher rate payers declare the income and the credit together.

Gain on disposal is, as you say, not taxable until you realise the gain (again, assuming this is about OEICs and unit trusts). So yes, keep an eye on disposals and use your allowance.

That's it really.

Oh yes - annual charges are typically charged to the fund income, so not for you to worry about. Your div will be you share of net fund income (after charges and all sorts of other guff)

Initial charges might be taken out of your cash subscription at the start - that means you have a smaller holding and a lower base cost.