Taxation Of OEIC And Unit trusts

Question 1

What are unit trusts and OEICs?

Answer 1

Collective investment schemes where investors purchase units or shares in a pooled fund which is run by an investment manager

Question 2

What is tax treatment of OEIC/UT within the fund on income received by fund manager?

Answer 2

Interest & rental corporation tax at 20%

Dividends 0%

Foreign dividends may have some withholding tax that is not reclaimable

Question 3

What type of income do investors receive from OEIC/UT?

Answer 3

Interest or dividends

Question 4

When is income treated as interest from a OEIC/UT?

Answer 4

When more than 60% of the fund is cash or fixed interest securities or corporate bonds.

Question 5

How much is personal savings allowance?

Answer 5

Non and basic rate tax payers £1,000

Higher rate tax payers £500

Additional rate tax payers 0%

Note non and basic could also benefit from starting rate for savings of £5,000

Question 6

After personal savings allowance what rates are interest taxed at?

Answer 6

20% - basic
40% - higher
45% - additional

Question 7

When is income from a OEIC/UT treated as dividend income?

Answer 7

When the fund value derives from 60% or less in cash or fixed interest. I.e an equity fund.

Question 8

How much is the dividend allowance ?

Answer 8

£500 for everyone

Question 9

After dividend allowance what rates of tax are payable on dividend income?

Answer 9

8.75% - basic
33.75% - higher
39.35% - additional