REIT return tax compliance

First Time Investing šŸ£
1

AFAIU, REIT has two income stream, Property Income Distribution and Dividend.

Now dividend income is not to be declared to HMRC if itā€™s under 2000Ā£. Property income distribution with have 20% tax deducted at source.

I have following questions,

  1. Is property allowance of 1000Ā£ include REIT PID?

  2. How do you declare PID income to HMRC ?

Anything else important first time investor to know.

I do not want to pay 300Ā£ to tax consultant for 100Ā£ REIT income.

2

You declare it as ā€˜other incomeā€™ on your return

If youā€™re a basic rate payer youā€™ll likely be ok as most deduct at source from the PID.

British Land website contains the following useful info ā€¦

Of course if youā€™re holding was wrapped in an ISA then you can apply to receive income gross. So all in all your better off wrapping it in an ISA if your manager allows.

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3

Is REIT PID comes under property allowance ??

4

Yes, a PID is considered income from a property rental ā€“ as if you owned the property and rent was paid directly to you.

See HMRC confusing text here >>>

https://www.gov.uk/hmrc-internal-manuals/guidance-real-estate-investment-trusts/greit08005

But ā€œassumingā€ 20% is deducted at source AND ā€œassumingā€ youā€™re not a higher rate tax payer you have no issue. If you are a higher rate payer or tax isnā€™t deducted at source you need to ensure Freetrade supply you sufficient data for you to accurately complete your self assessment tax return - which is basically the split between PID/non-PID and the tax deducted on the PID at source (if any).

I think 99.9% of Freetrade users will be fine for now. Just be careful in case youā€™re not.

5

The below is from Moneyvator.com

PIDs within a tax shelter( eg an ISA)

You do not pay tax on PIDs held within tax sheltered accounts.

However, unlike ordinary dividends that are paid gross (i.e. with no tax deducted), PIDs are generally paid with 20% tax deducted.

This means the tax already paid needs to be clawed back .

Your tax-sheltered account should be issued with a 20% tax credit associated with your PID income, which the company that runs your ISA, CTF or pension should use to reclaim the tax paid from the taxman.

From the chat with Shanice of Freetrade, she told me that Freetrade do not support REITs in an ISA right now, as they require a 20% tax payment which we canā€™t operationally support at the moment, but if it is taken at source, then this has already been dealt with?

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