OEICs - Open-Ended Investment Companies
Taxation
Your tax situation will depend on the type of distribution you receive, which in turn will depend on the type of OEIC you have invested in. Do remember, if you have invested in an OEIC via a stocks and shares ISA, you will not have to pay any further tax. Income from investments held within ISAs does not have to be declared on your tax return.
If you are holding an OEIC investment outside an ISA and you receive a distribution, you will receive a tax voucher from the fund manager showing both the amount that you are getting and the amount of tax on the distribution that has been paid by the manager.
OEIC funds invested in gilts, loan stocks and other interest-bearing investments pay out interest distributions. Outside an ISA, you will receive these distributions net of 20% tax, unless your taxable non-savings income is below £2,320, in which case you will pay tax at 10%. You cannot register to have the interest paid gross but, if you are a non-taxpayer, you can reclaim any tax overpaid. Dividend distributions are paid net of 10% tax.
The information on all the tax vouchers you get during a tax year should be recorded on your tax return. If you have not received a tax voucher, you should ask your fund manager to supply one.
How much, if any, further tax you will then have to pay will depend on your status - non-taxpayers may reclaim tax paid on interest but not on dividends, basic rate taxpayers will have no further tax to pay but higher rate taxpayers will face a further tax bill.
On the sale of your investment in an OEIC there may also be a Capital Gains Tax (CGT) liability. Subject to the annual exemption, £9,600 for the 2008-09 tax year the gain will be taxed at the flat CGT rate of 18%. Once again, any OEIC investment held within an ISA would be sheltered from any further tax liability and there would be no tax to pay on disposal.
Benefits
Download guide† (100 KB)
† Requires Adobe® Reader®. You can download it for free here.