VUSA vs VUAG for long term investing and Withholding Tax question

Investing and Markets šŸ“ˆ
24

Accumulating ETFs where the dividends are reinvested automatically would if in an GIA be taxable.
In that they count towards the Ā£2000 dividend tax free allowance, itā€™s termed a notional distribution or notional dividend.

So youā€™ll need to note them down if in a GIA

1 Like
25

I am thinking of buying the VUSA EFT to put in a new ISA with Freetrade as this pays Dividends rather than Accumulative. So it will give me a choice as to reinvest or buy different shares.(which wonā€™t effect my tax free allowance as its in the ISA wrapper great)

However the VUSA EFT has a 0.07 fund charge how does this effect your fund do they take it out of the Dividends before you have them or do they take it out of any cash in your ISA or do they sell a share if you donā€™t have the cash in the ISA.
This is my first stocks and shares ISA I will be opening so any help on how they manage the EFT in the Freetrade app would be helpful.
Thanks

26

Thanks. Independent research also confirmed this, which is correct.

Iā€™m never ever buying VUAG in a GIA then, sounds like a headache!

27

The fund charge is priced in the value of the ETF share, you donā€™t need to do anything.

28

Iā€™m pretty sure the poster was spot on in what they said.

Outside of an ISA, dividends within accumulating funds do count towards your allowance.

Inside an ISA, its not applicable because UK tax is not payable. But there are some taxes payable within an ISA, an example being US withholding tax which comes off at source - I believe you can reduce this by holding certain stocks in certain SIPP accounts.

29

Many Thanks for clearing that up

30

this is correct. I spoke with vanguard literally about an hour ago. Freetrade offer the VUAG & VUSA, whereas on the UK platform, Vanguard only offer the VUSA. If you get it paid into the platform account and not your bank account - as markrc states - it does not count towards your allowance. If you read up on Freetrades articles (Top 10 ISA buys on Freetrade in March) it informs that:
" Thatā€™s because dividends are incredibly important to the value of total returns. According to Hartford Funds, an initial Ā£10,000 invested in the S&P 500 over the 60 years from 1960 to 2020 would have grown to $627,161 in price terms, or $3,845,730 with dividends reinvested"

WOW!

3 Likes
31

Yes. Team Ā£VUAG in ISA, Ā£VUSA in GIA it is!

32

Youā€™re talking about VUSA where dividends are distributed as cash, OP is talking about VUAG where dividends are re-invested and not distributed.