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Taxation of Investments

  • Where the fund manager invests greater than 60% of the fund in cash or fixed interest, the fund will be classed as a non-equity fund and income will be treated as an interest distribution.
  • Where the fund contains less than 60% in cash or fixed interest, the fund will be classed as an equity fund and income will be treated as a dividend distribution.

Interest distributions:

  • These are paid with 20% tax deducted at source which satisfies the liability of starting and basic rate taxpayers.
  • Interest distributions which fall within the starting rate tax band allow the investor to reclaim the balance between the starting rate (currently 10%) and the 20% deducted.
  • Non-taxpayers can reclaim the whole 20% deducted.
  • Higher rate taxpayers will have a further liability of 20% of the gross distribution due via their self assessment.
  • From 6 April 2010, tax payers with taxable income of 150,000 or more have a further 30% liability.

Dividend distributions:

  • Paid with an attaching 10% tax credit, which satisfies the liability of starting and basic rate taxpayers.
  • The tax credit is not reclaimable by non-taxpayers.
  • Higher rate taxpayers have a further 22.5% of the gross distribution due via their self-assessment.
  • From 6 April 2010, tax payers with taxable income of 150,000 or more have a further liability of 32.5%.

Capital Gains Tax

OEICs and Unit and Investment Trusts are not themselves liable for Capital Gains Tax on their internal realised gains. Investors are personally potentially liable for CGT on gains realised on disposal of their shares. A fund switch is treated as a disposal for CGT purposes.