We issue a yearly tax pack to customers who hold investments within a general investment account (GIA). This type of account can sometimes be called a 'standard account' or 'non-ISA'
If you hold a GIA you will receive a consolidated tax certificate (CTC) which includes details for a full tax year.
As dividend, income or capital gains are not reportable on ISAs or pensions, you will not receive a report if you hold only these account types.
What does the CTC include?
Your CTC will include details of any dividends, income and capital gain or loss for the period in question.
There are different income types listed, what is the difference?
Dividends classed as income (equities)
Dividends are payments received from the underlying shares held within your portfolio. We use exchange traded funds (ETFs) to build your portfolio. The ETFs we purchase are Dublin and Luxembourg based and always have either reporting or distributor status (see below). We buy ETFs in these categories because they are treated as if held in the UK and generally result in less tax.
Dividends generated from these ETFs are re-invested back in to your portfolio and are subject to income tax. The income tax rate applicable depends on your individual circumstance.
Learn more: www.gov.uk/tax-on-dividends/previous-tax-years
Dividends classed as interest (bonds)
Distributions are also payments received from the underlying shares held in your portfolio. However, because the ETF you own predominately has income or bond type stocks within it any distribution is treated as income — similar to interest on a bank account — and should be reported as such.
You may have an additional section for 'Excess income'. A requirement of the regulations is that a Reporting Fund must report to HMRC details of their total ‘reportable income’ for its accounting year, including both income distributed to its investors and any other income earned but not distributed. The amount of the reportable income which has not actually been distributed to investors, either as dividends or interest, is known as Excess Income.
This is interest paid on any cash. We always hold a small amount of cash as part of a balanced investment portfolio and pass any interest earned on this cash balance directly to you.
What is a reporting fund status?
The Offshore Funds (Tax) Regulations, which came into effect in 2009, replaced the previous regime of distributing/non-distributing funds with a new reporting/non-reporting regime. The new regulations allowed an offshore fund (i.e. a fund not domiciled in the UK) to apply to HMRC for Reporting fund status. Reporting fund status allows a fund (or in our case ETF) to be taxed as if it were held inside the UK.
Why is reporting fund status important?
If the ETFs we use did not have UK Reporting Fund Status then your investments may be taxed as if held overseas. In particular this means that any capital gains would be charged as income often resulting in a higher rate of tax being paid.
How will I know whether a fund I hold units in is a Reporting Fund/ETF or not?
All of the ETFs we use to build Nutmeg portfolios have reporting fund status.
Why do I have foreign interest or dividends?
In most cases the exchange traded funds we buy on your behalf are domiciled in either Ireland (IRL) or Luxembourg (LUX) and so the income or dividends received count as foreign income, even if companies or entities within the fund are in the UK.
Do I need to consider Excess Income when performing self-assessment?
Yes, when performing self-assessment U.K investors must consider both the distributions actually paid from the fund and any Excess Income.
Is the Excess Income shown on my Consolidated Tax Certificate (CTC)?
Yes, if it is applicable to you. There will be a separate section covering this.
Why does the excess income have a country code of IRL or LUX?
Most of the ETFs we buy within your portfolio are domiciled overseas in either Ireland or Luxembourg.
My report includes details of capital gains/lossses (CGT). Should I report these?
As we rebalance your portfolio throughout the year we need to make purchases or sales of shares. Each of these transactions attracts a capital gain or loss. This means that there may be a figure on your CTC reporting this regardless of whether you've added any new cash to your investment or made a withdrawal. If you are completing capital gains in a self-assessment tax return you’ll need to combine the figure here with other gains or losses outside Nutmeg. If you're subject to UK tax in the usual way you have a capital gains total allowance of £11,100 in the financial year 2016/17 and will only need to report total gains in excess of this. Capital losses can be registered with HMRC to offset capital gains in future years.
Learn more: www.gov.uk/topic/personal-tax/capital-gains-tax
The amount on my CTC is very small, should I report it?
Receiving this report does not mean that you have to complete a tax return — we are required to send this information to customers who held any investments outside an ISA or pension for any time during the period.
If you’re unsure if you have to complete a tax return, visit www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return or call the HMRC helpline on 0300 200 3300.
All of my funds are within an ISA, why is there a small amount listed under bank interest?
When you pay new money into your Nutmeg account we automatically credit this to your general investment account (GIA). At this point our systems check to see if you have an ISA open and if there is room within the limit to move the new money in to it. Where cash sits within your GIA for a day or so during this process it may be entitled to interest which in turn is credited to the GIA and thus a small amount appears on your tax voucher.
Where do I put this on my tax return, if I need to do one?
To help you use this information, we have summarised the key points from the HMRC help pages. We cannot offer tax or accounting advice. If you want more information, please have a look at the HMRC’s helpsheet here: www.gov.uk/self-assessment-forms-and-helpsheets
If you have any other foreign income, or if your foreign interest is greater than £2,000, report this income in the foreign section (SA106). Otherwise include as untaxed foreign income in the standard section and include an appropriate note in the 'any other information' box.
If your foreign dividend income from Nutmeg is greater than £300, report in the foreign section (SA106). If this is your only source of foreign income and it is less than £300 report in the standard pages as foreign dividends, and include an appropriate note in the ‘any other information’ section.
Report all 'Excess income' in the foreign section. (SA 106) d Report in the standard pages, in UK interest section.
Report capital gains in the capital gains section (SA 108)
I still have more questions, what should I do?
If you have questions about the content of this report, please contact customer services. If you need help completing your tax return, please see HMRC website or telephone them on 0300 200 3310, or contact an accountant.
Please note Nutmeg are unable to offer tax advisory services. You should seek the professional services of an accountant or tax advisor if you are unsure of your tax position.
Links correct at time of publishing.