Tax on dividends

Freetrade Chat 🔥
1

Hi,

This is a education case I’m afraid. Received my first dividends today, I was under the impression that I could earn £2000 in dividends each year before paying tax on the proceeds but Freetrade have deducted 20%. Not claiming they are wrong btw - I just want to understand why tax is due on a UK dividend before the £2000 limit is hit.

Obviously appreciate S&S ISA is the preferred way but I have a pre-existing one elsewhere this financial year with no cross over with Freetrades available stocks and considerably lower costs then £3.

2

What’s stock was it? A REIT I’m presuming?

3

Is that dividend coming from a REIT? If the answer is yes… 20% withholding tax is the price to pay

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4

Aha, spot on thank you both - yes a REIT, first stock I bought before I had the sense to do ANY research (shocking I know!)

Come April I’ll be making a decision on FT ISA and part of that will be selling the REIT stocks as they seem to have more downsides than upsides at the moment.

Appreciate the advice, and the speed of it! Cheers

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5

If you put a REIT in an ISA, the company does not pay corporation tax, and you do not pay dividend tax. A non-REIT company still has to pay corporation tax.

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6

Thanks Han

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7

Thought Freetrade ISA do not support preventing income from REITs being taxed at 20% (yet?)

8

They don’t, not at the moment.

9

Also be careful of withholding tax on US stocks if you don’t know. Happy investing