Automatically reinvested dividends: how taxed

Good day, I have seen similar queries like the one I have on this forum, but still was not certain on UK tax treatment. That is why I am asking my question. From a previous employment, I have a share plan account, where I accumulated vested shares. Dividends are paid out, BUT automatically reinvested and result in additional (fractions of) shares held. I have no choice in this; dividends are automatically reinvested: this is how the share plan account works. From other threads on a similar topic, I understand: 1) There is no tax due on dividend income, when these dividends are automatically reinvested (as described above) 2) Capital gains tax is due when a sale of these shares occurs in the future (if this results in a capital gain) My two questions: A) Is my understanding under 1) and 2) correct? B) In which HMRC manual (chapter etc.) is this explained: both (no) tax on dividend income and capital gains. Thank you for your clarification in advance.

Hi Koala Bear,
1. If the dividends are automatically reinvested by the company then you do not declare these.
2. Yes if the shares are the sold at a profit then these will be liable to capital gains.
Guidance is here:
SAIM5000 - Dividends and other company distributions: overview and contents
Tax when you sell shares
Thank you. 

Thank you. This is clear and very helpful.

I have a follow-up clarification and questions to our earlier exchange, as I preparing my tax return: Clarification: as mentioned before, the company does pay out dividends; I receive a quarterly dividend confirmation statement. The issue is that I do not receive these dividends in cash. The way the share plan accounts works, is that rather than receive the dividends in cash, these monies are automatically reinvested by the share plan in buying additional shares. I have no choice in this matter. Questions: a) Is my understanding still correct that I do not need to declare these dividends, and therefore no tax is due on these dividends. b) To support future capital gains calculations: At what cost would I add these additional shares to my holdings? Thank you.

Hi,

If it is the company that is automatically reinvesting them, then no you don't declare them.

Thank you.

Having studied Koala Bear's questions and HMRC Admin 18's Response, I would be grateful for an answer to question b) To support future capital gains calculations: At what cost would I add these additional shares to my holdings? Thank you