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iShares highlights tax changes for UK individual investors in ETFs

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iShares, the exchange-traded fund arm of Barclays Global Investors and Europe’s (and the world’s) largest provider of ETFs, says individual investors should familiarise themselves with thr

iShares, the exchange-traded fund arm of Barclays Global Investors and Europe’s (and the world’s) largest provider of ETFs, says individual investors should familiarise themselves with three recent tax law changes affecting ETFs to ensure they receive the funds’ full investment benefits.

The changes, brought in under the government’s new tax regime introduced on April 6, has changed aspects of the tax status of investment in products domiciled in Ireland, like the 59 iShares ETFS listed on the London Stock Exchange.

As a result of the changes, investors will now be subject to a flat capital gains tax rate of 18 per cent applicable to the disposal of holdings in all Dublin iShares products with UK offshore funds distributor status. The new CGT rate will offer individual portfolio investors significant tax savings, since previously even maximum taper relief lowered the tax rate only from 40 to 24 per cent for non-business assets.

Secondly, UK individuals owning less than 10 per cent of iShares and other Dublin funds are entitled to a 10 per cent tax credit on dividend distributions from the funds. Before April 6, no tax credit was available for on non-UK sourced dividends.

Finally, non-domiciled investors that have been resident in the UK for seven out of the previous nine tax years may opt for taxation of non-UK sourced income on the remittance basis – that is, only if and when it is brought into the UK – only if a GBP30,000 annual tax is paid.

‘While the changes to the taxation laws do not impact ETFs extensively, it’s vital that investors carefully review the government’s new tax regulations of April 6 and understand how they impact ETFs, particularly as they become an increasingly mainstream product for high net worth investors,’ says Nick Shellard, head of UK sales at iShares.

Barclays Global Investors, which had more than 2,900 institutional clients and USD2trn of assets under management at the end of last year, is the global product leader in exchange-traded funds with more than 320 iShares funds for institutions and individuals.

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