VUSA vs VUAG for long term investing and Withholding Tax question

I recently decided to move my investments from the iShares GSPX S&P 500 ETF to Vanguard’s VUAG as the returns seem to be much better.

My plan is to invest on a monthly basis for the next 30 years using an ISA. Goal is around £600,000. I didn’t really care for dividends as I was planning to reinvest them anyway, until I realised that when I reach my goal (retirement) I won’t be investing anymore, but just withdrawing. So in that case, dividends would be a nice little boost to my other profits from the ETF.

My question is if it’s better to have my money in VUSA (paying dividends) or VUAG (reinvesting dividends automatically) and does it matter? In other words, if VUSA increases 1% less than VUAG but pays 1% dividends, would it be the same thing anyway?

I also have a quick tax questions: Do I need to pay any dividend tax with an ISA (or withholding tax) if the ETF is registered in Germany (which I think is where VUSA is)? Is there anything at all I need to consider long term with any of those two ETFs like anything to declare, etc.?


@n4n1 VUSA and tax: It is not a US stock. Bought and sold in £ on LSE. No US tax implications for non US tax residents.

VUSA/VUAG - if you are interested in not having the dividends as cash then VUAG. VUAG obviously grows more in value because dividends from VUSA don’t earn anything. Reinvestment from dividends is what will make your investment worth more over time and if Vanguard is doing that reinvestment for you - even better.

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Both have thier upsides.


If your a dividend investor and like quarterly dividend yield this one’s for you.

Despite no US witholding tax, there will still be FX fees as £VUSA’s dividends are reported in $USD. If your happy for the dividend to be put back into the fund, hopefully making the growth element of this ETF outperform £VUSA then this one’s for you.

Alternatively if your keen on both there is always the option of buying both, if you so choose

Thank you both!

I was just thinking for the time when I will no longer be reinvesting, but I suppose when that time comes I can always just move all my money into VUSA and start collecting dividends if needed.

In terms of the tax: I just read this on the Just ETF website which is where my confusion came from:

UK investors are exempt from withholding tax on the income they receive from ETFs domiciled in Ireland and Luxembourg.

But you may well pay withholding tax on ETFs or other investments held in other territories, even if you hold that investment in an ISA or a SIPP.

As VUSA seems to be registered in Germany, I suppose it is subject to withholding tax.

But is this withholding tax aomething I need to declare and pay separately or is automatically deducted by Feetrade?

@n4n1 withholding tax is a US thing. If you are not a US resident it is not an issue for you**. If you are still concerned talk to your broker and they will confirm again.

UK has double taxation treaties with many countries including Germany which take care of a lot of things. But as I said talk to your broker - after all you are talking about a tax that is taken off at source i.e. the broker will deduct it. Finally note that where withholding applies the treatment will be different if it is in a SIPP or an ISA - because of the way double taxation treaties work.

Yes I agree you could move to VUSA when you are not eventually adding money to your investment. But then again you might choose to sell bit by bit at that time. Moving into VUSA guarantees that the chicken won’t be laying eggs that lay eggs. Remember dividend reinvestment is where much of your gain comes from.

** I should be careful here … if it is outside a SIPP/ISA and withholding applies then it will be taken off at source. If it is inside a SIPP/ISA and it is the US withholding tax then the broker claims back a portion or all of it for you depending on ISA/SIPP. The latter also depends on the broker. If there are other taxes relevant to other countries then your broker will inform you. You will not be able to claim any tax back in the UK from any thing removed at source that is inside your ISA/SIPP because you don’t actually declare it in your SA in the first place.

BTW, VUSA is a Ireland domiciled ETF. The manager is Vanguard Group (Ireland) Limited and the KID


Tax: VF is subject to the tax laws of Ireland. Depending on your country of residence, this may have an impact on your personal tax position. You are recommended to consult your professional tax adviser.

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Out of curiosity what made you go for GSPX over VUSA/VUAG in the first place? I remember you posted earlier in the year looking for advice on which SP500 ETF to choose

You’re very US-focused with just the S&P500had you considered some.emerging markets - India / China?

I went with GSPX because of the lower price. I currently invest the same amount each month so if I wanted to invest £400 with GSPX I could get really close to that figure at around £7 per share at that time. The difference is bigger with VUSA / VUAG at around £54 per share at the time. So in that case I could either buy 7 shares for £378 or 8 shares for £432, neither of which was ideal.

And now I’m switching because I’d rather invest a little more but get better returns. Not sure why there’s such a difference in performance between GSPX and VUSA / VUAG. I wish I had realised it sooner.

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Thank you very much for the detailed explanation! I think I got confused with Germany because that’s what is listed on Vanguard’s site under “Tax Status”. But I guess that’s different and I can see the domicile is actually Ireland.

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GSPX is currency hedged and the £ has weakened relative to $. A GBP Hedged ETF will perform better if the £ strengthens and will perform worse if it weakens. Here’s a good explanation:


I have not actually, but I’ll definitely look into that. Are there any good ETFs I should consider? I don’t really know much about those markets and have never invested in them before.

Makes sense! I forgot to consider this for some reason. Thank you!

Have a read through this thread. Some incredibly knowledgeable people have shared their thoughts. I sort their advice before picking the investments for my pension.


Thank you! I’ll have a read!

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If I want the dividends automatically reinvested through the VUAG, but later on down the line I want the dividends payed out. Could I sell the VUAG and put it all in the VUSA even if its over £20,000 in an isa

Hi @EmergingMonk8

Any trades made within an ISA doesn’t affect the annual allowance.


A simple question about the most popular Vanguard S&P500 ETFs: do the dividends in VUAG, which are automatically reinvested from the ETF itself (so I never see them) count towards your yearly dividend allowance? I would think that they don’t, as otherwise they’d get taxed twice or it would get really hard to compute the actual CGT when you sell VUAG. But my friend asked this question and I am not sure.

I have never held VUAG, only VUSA so far, so I do not know if you are even notified of the dividend.

Hmmm. I have some VUSA (have done for a few years) and always receive my dividend. So I’m interested as to why you think you don’t get one :face_with_monocle:

This was mine from this week…

Edit: I’ve just re-read your post and see you are not currently invested. So I’m not sure where you heard you don’t receive the dividend (and it’s automatically invested)?

I’m 99% sure they do count towards your allowance. For this reason, it is generally advised to use distributing ETFs outside a tax wrapper because it can be a real pain to work out otherwise.

That’s not correct I’m afraid. Dividends that are received by pension funds or on shares within an ISA are tax free and won’t count towards your dividend allowance.

If they are outside a tax free wrapper, they do count towards your tax free dividend allowance.

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