Dividends from Mutual Funds which are reinvested as units of the fund

Hello, I have recently moved to the UK, and i have been trying to gather the treatment on a mutual fund where dividends paid are reinvested back as units in the fund. The fund would in this case would declare dividends in Singapore dollars which is then converted to the relevant number of units based on dividend date. Eg: Units held 1,000 Dividend per each unit: 0.05 SGD/Unit Dividend: SGD 50 Unit Price at Dividend Date: SGD 20 No of Units added to existing holding: 2.5 Seeking guidance on how this income should be considered for UK tax purposes. Thank you!

Hi Ashanth Muthutantri,
If the company pays out cash dividends, you will owe taxes on those payments even if you decide to reinvest the cash received.
If however, the company reinvests your dividends to purchase additional shares, you will not owe taxes until you sell those shares. 
Thank you. 

 

Thank you! This is very helpful. Just one more addition, this is an investment in a mutual fund. No cash is paid out and the dividend is directly reinvested as units of the fund. Just wanted to be sure that this would not change the position of when taxes would be due. Thank you!

Very useful!

Hi Ashanth Muthutantri,
To confirm, it will not. 
Thank you 

 

Thanks much appreciated!

Hi HMRC Admin, I have a similar situation with an Employer's share scheme in Germany which paid out a dividends in cash into my UK bank account and a second dividend was automatically reinvested in the Employer's share scheme in Germany. Is this the same situation as above? where you said ; "If the company pays out cash dividends, you will owe taxes on those payments even if you decide to reinvest the cash received. If however, the company reinvests your dividends to purchase additional shares, you will not owe taxes until you sell those shares" Thank you

Hi
Yes, the same guidance would apply. 

Hi, that’s really helpful thank you.

Hi With respect to the above posts, can you please confirm if this guidance also applies to UK Company share scheme dividends applied within UK? Also, if tax has been paid on previous years dividends that have been automatically reinvested, can a rebate be claimed? Thanks

Hi HMRC admin I have Accumulation investment funds and I have received dividends of approx £3000, but the dividends not received in cash, they are reinvested into the funds. Is this the same situation as above where you said ; "If the company pays out cash dividends, you will owe taxes on those payments even if you decide to reinvest the cash received. If however, the company reinvests your dividends to purchase additional shares, you will not owe taxes until you sell those shares" ? i.e. do I need to report these dividends in my Self Assessment? Thank you.

Hi Kevin

Yes it does. For previous years you would need to submit a claim in writing and say that you are claiming overpayment relief. The earlier year that can be reviewed is the 19/20 tax year.

Thank you

Hi johngold1 johngold1 

If the company reinvested the funds then no you don't declare them.

Thank you

Many thanks for the response and clarification.

Can I ask if this applies only to mutual funds, or is it shares as well? e.g. do I need to declare anything from the United Utilities DRIP dividend reinvestment scheme?

Hello Admin: Could you be a bit more specific on the definition of "company" here in this earlier quote: "If the company pays out cash dividends, you will owe taxes on those payments even if you decide to reinvest the cash received. If however, the company reinvests your dividends to purchase additional shares, you will not owe taxes until you sell those shares. " Here's a specific example: if I am holding a mutual fund (or individual stock or ETF) in a brokerage account, and I set that account to automatically re-invest the dividends back into the fund, would that be covered the same as the example you give above? In this case, I am not receiving and re-investing the dividends myself. A third party is doing it on my behalf and I am given the additional shares rather than the cash dividend.

Hi everyone. The HMRC admins on here may be giving incorrect advice. I understand that from HMRC that generally you DO have to declare dividends in your self assessment even if they are not received in cash, i.e additional shares or investments back into a fund. I understand that these dividends may be taxable,especially if they are above £2000 Could the HMRC admins on this forum please double-check and respond here please? Thanks.

Hi MikeR14,
If the company automatically reinvests then no

Hi d3a350,
As you have stated that you have set the account to reinvest then these dividends are not taxable.
Thank you. 

Hi,
If the company automatically reinvests the dividends to buy more shares, no. if you choose to reinvest them, yes.
Thankyou.