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This website contains information which may or may not be applicableto your own situation and circumstances.
Any information or advice on this site does not constitute a personal recommendation. If you have any doubts as to whether a product or service is suitable for you, please seek independent advice.
UT / OEIC /IT Taxation
Taxation of unit trusts, investment trusts and OEICs
The taxation of unit trusts and OEICs is identical as far as the investor is concerned.
- Investors are liable for income tax on dividend and interest distributions
- Investors are liable for Capital Gains Tax on realised gains, subject to normal allowances
Income is normally distributed from unit trusts and OEICs on set dates in the year, and usually the interim and final distributions are spaced 6 months apart. However, where the distribution is normally very small (e.g. on growth funds) it may be paid in one installment. Other funds (e.g. specialist funds) may not make distributions at all.
An income distribution from an equity fund is called a dividend. A distribution from a non-equity fund (e.g. gilt and corporate bond funds) is sometimes referred to as the coupon. Dividends and coupons have different tax treatments.
Investors are liable for CGT on gains they make when they sell their units (or shares in the case of an OEIC). When considering whether or not your gains exceed the annual exemption, remember that gains from unit trusts or OEICs cannot be taken in isolation. They must be added to gains realised from all other asset disposals in the tax year.
Caution: As a private investor, fund switch even within the same 'umbrella company' is treated as a disposal for CGT purposes.
Taxation of Investment Trusts
There are a number of tax advantages to IT investment, and they are also well suited to people who want to make regular monthly savings for their retirement, for their children, or for specific purposes like school fees or house purchase. One of the benefits of owning shares in an investment trust is that it can trade in and out of its investments without incurring capital gains tax.
MORE INFORMATION IS AVAILABLE HERE on Investment Bonds versus UT’s & OEICs.