I own VUSA and receive dividends. But VUAG does not distribute dividends - instead, they reinvest them into S&P500 automatically.
There was a pretty big omission from my original post. The question is about VUAG.
Sorry, I donāt understand, whatās incorrect? I took it as read that OP was talking about outside an Isa.
Itās worth noting that dividends within an Isa can in fact be subject to tax: eg withholding tax.
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, itās termed a notional distribution or notional dividend.
So youāll need to note them down if in a GIA
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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 wonāt 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 donāt 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
Thanks. Independent research also confirmed this, which is correct.
Iām never ever buying VUAG in a GIA then, sounds like a headache!
The fund charge is priced in the value of the ETF share, you donāt need to do anything.
Iām 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.
Many Thanks for clearing that up
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:
" Thatās 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!
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Yes. Team Ā£VUAG in ISA, Ā£VUSA in GIA it is!
Youāre talking about VUSA where dividends are distributed as cash, OP is talking about VUAG where dividends are re-invested and not distributed.
Yes thatās right. Before OP edited their post, they were asking more generally about S&P500 ETFs. They edited the post after Iād made my first comment to (I presume) make it a little more clear what they were asking. Thanks.
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