Accumulating or Distributing ETF in ISA (Fiscal)

Investing and Markets 📈
1

Depending on the country-specific rules on CGT, dividend tax, stock exchange tax, … it can make more sense to choose one version over the other.
E.g. there is no CGT in Belgium (usually), but there is a dividend tax so the most sensible version is to go for the Accumulating ETF with a fund domicile in Ireland (US double taxation treaty 15% withholding tax, no additional Irish taxes on income received by the fund, no additional local taxes as the fund doesn’t distribute).

Some countries even allow to reclaim the 15% withholding tax on dividends the Irish fund pays on US-source dividends.
Does this exist in the UK? I.e. is it possible to reclaim the 15% withholding tax of a distributing ETF when it is in an ISA? I remember reading that it is possible to reclaim this with a SIPP in some cases.

There could be an impact on compounding as well for Acc vs Distr, but let’s assume zero transaction costs and reinvesting the distributed income immediately in the ISA.

2

I think all else being equal, if you are going to reinvest dividends anyway I think it makes sense to get the accumulating version. Even with zero transaction costs etc. you need to wait for the dividend to reinvest it, but presumably the accumulating version will reinvest dividends it receives from it’s holdings straight away?

3

Agreed, the question is probably more:
Is there a way to reclaim the 15% US withholding tax when the investment is in a tax-free wrapper?

And if there is, I would assume it’s easier to reclaim this via a distributing ETF because you know exactly how much dividend you received (after withholding tax).
If there isn’t, then I would definitely go for the accumulating version to save me the hassle :slight_smile: