If we hold US stocks in FT SIPP we are still paying 15% withholding tax.
Based on my amateur research -
- We don’t need to be paying this tax.
- Freetrade SIPP structure is set up so we have to pay the tax, other SIPP providers AJ & Hargreaves are set up in a way that no tax is taken.
The Request - Can the SIPP set up be adjusted so we are not paying the US gov tax that we don’t in fact have to. Personally, I really don’t want to pay tax on dividends on Apple etc inside a SIPP that I’ll be holding for 30+ years.
SIPPs are different. Under some tax treaties, there are special clauses for WHT on dividends paid into a pension scheme. One very important case is the UK-US DTA. Under this, dividend payments by US companies into a UK pension scheme should be taxed at a zero rate (see the [HMRC manual (DT19867A - Double Taxation Relief Manual: Guidance by country: United States of America: Dividends: from 1st May 2003 - HMRC internal manual - GOV.UK) and the treaty text [PDF]).
“SIPPs qualify for a zero rate of withholding tax from certain countries including the US. However, not all brokers structure their SIPPs to enjoy this.”
UK shareholders in US companies will receive their dividends net of 15 per cent tax if they hold their stock within an Isa or outside a tax wrapper. If their holding is within a Sipp, then they are treated like a conventional pension fund and receive their dividends gross.
Sounds like a no brainer so voted but best you vote for your own idea
Yeah freetrade confirmed a bit ago they don’t currently support this… unfortunately.
It adds up especially on a SIPP
What work needs to be done to achieve this? Is this a wholesale reworking or a tweek, does anyone know?
Definitely super-important. I will not move any larger amount of money in my SIPP over to Freetrade unless this is sorted (I’m surprised it’s not yet!)
With the stated aim to increase the AUM this feels like a very important feature to focus on.
Higher AUM = Higher valuation
Higher valuation = Cheaper capital
Cheap capital = More engineers to make more stuff!
Just learned about this issue now, and see it as a very important issue of fiduciary duty to investors. Very important to fix.
It is terrifying how much money is lost to a long term pension from this tax being withheld over time and adding in the compounding effect being lost Seems a real no brainer and should be a high priority TBH.
While I appreciate this isn’t an exciting feature but this is affecting some of the most valuable Freetrade customers regularly.
Now I’m aware I’m at risk of overstepping a line here so if have please view this as supportive enthusiasm … I called Gaudi who provides the white label platform that Freetrade use. They obviously weren’t keen to talk to me about this but did confirm this is solely a decision for the Freetrade administrators.
So I ask those administrators - what’s stopping you from implementing this?
I started this thread nearly a year ago, and no response from FT team yet. Does anyone know how to get a response from FT or get this a higher priority? I imagine if more users knew about this issue they would also be complaining, and bumping it up the request list. Just glancing at my dividend emails I’m paying at least £70 extra a year to FT/The US Gov in lost dividends.
I have no idea what Gaudi do behind the scenes about this. If they are pooling shares then it is easy to see what the problem might be (similar to the nationality declaration issue)**. Did you get the impression they were blowing some wind or did they have a solution - no extra costs- in place ready to go?
** OTH it seems that dropping the 30% to 15% is a step that is “relatively easy” to do (as it has been done): again I don’t know why but it suggests that there are additional certification requirements to go from 15% to 0%.
@Viktor @clloyd could we please get update on this
The person I spoke to was very professional and wouldn’t be drawn on specifics about how much of this issue rest with Gaudi & how much with Freetrade. They did say that they provide the white-label platform and it is up to Freetrade administrators to implement the 0% withholding.
I want to be clear that I do not want to be seen as a troublemaker here, the conversation was just a few minutes with someone at the front line on the help desk. I have been regularly accused of being a fanboy and lacking objectivity but this shouldn’t be a difficult job.
Freetrade mission statement
Let’s do this! I don’t know who I’m addressing but someone - Open that MacBook, stick in those AirPods, and work like Michael Burry in the big short.
Don’t close that lid until this has been shipped then come here, drop the mic and give us something to cheer. This is symbolic now, show you’re listening and show you’re doing something about this!
May I ask, why does freetrade use Guadi’s white label services for the SIPP when it doesn’t elsewhere. I’m just curious?
It’s probably what has allowed FT to launch a Sipp relatively quickly, similar to the link up with DriveWealth for US stocks. I imagine it would cost a lot and be a real timesink to start from scratch.
Now compound that each year over a working life in a SIPP and it is quite an extraordinary amount!!!
The funny thing is ONLY 51 people voted for this!! Who in their right mind doesn’t think saving 15% of dividends is something worth clicking a mouse for? Many other brokers have this so why not FT?
Hey @Viktor now you’re here I don’t suppose you fancy looking into this, do you? Every month I pay an additional 15% tax on my GLAD dividends. You can see from the post history you’ve got some customers this affects who have done the research, we’re not just standing on the sidelines heckling.
You’re assuming they’re even aware they’re missing 15% of their US dividends, most people don’t go on forums and your average person building a pension doesn’t really know about withholding tax never mind the rules that apply in pensions. Unless anythings changed recently, it was never that clear in any documentation that Freetrade does this. When SIPPs were being introduced people (including myself) had to ask several times if there was going to be any withholding tax.
Congrats on shipping ISA REIT and given you’re going to be working on SIPP REIT and I’m kinda hoping you can take a look at this.
Paying the 15% US withholding tax on all dividends feels like a kick in the teeth every time I get one paid, which is monthly!
Thanks in advance