Tax changes impacting you
Tax changes to interest payments
Taxation of interest earned on unit trusts
As of 6 April 2017 we no longer deduct 20% tax from the interest distributions paid to you or accumulated on our unit trust fund range. This change will also apply to the interest stream of distributions paid (including accumulated distributions) in respect of the Legal & General UK Property Fund. The property income stream of the distribution will continue to be paid or accumulated after the deduction of income tax of 20% (unless you are eligible for gross income)*.
Your tax vouchers no longer show a deduction of tax from your interest distributions.
Taxation of structured deposit interest earned
From 6 April 2016 we no longer deduct tax from interest earned on your structured deposit investments.
Any interest earned counts towards your Personal Savings Allowance. Details of your Personal Savings Allowance are below.
Taxation of dividend distributions received or accumulated
From 6 April 2016 we no longer attach a 10% tax credit to dividend distributions paid to you or accumulated on our unit trust range. The dividend income earned counts towards your Dividend Allowance.
Details of your Dividend Allowance are below.
What is your Personal Savings Allowance?
From 6 April 2016, a personal savings allowance was introduced. If you are a basic rate taxpayer, you are able to earn up to £1,000 savings income tax free. Higher rate taxpayers will be able to earn up to £500. There is no personal savings allowance for additional rate taxpayers. Interest received by you in excess of the Personal Savings Allowance will be taxed at the following rates:
- 20% on savings income for basic rate tax payers; and
- 40% on savings income for higher rate tax payers; and
- 45% on savings income for additional tax payers;
Savings income includes the interest which is either paid to you or, in the case of unit trusts, accumulated. If you exceed your tax-free Personal Savings Allowance you will need to tell HM Revenue & Customs (HMRC) or include your savings income on your self assessment tax return should you need to complete one.
What is your Personal Dividend Allowance?
On 6 April 2016 a new tax-free Dividend Allowance was introduced. From the 6 April 2018, this allowance is £2,000. The Dividend Allowance means that dividends (including dividends accumulated) received by you in excess of the Dividend Allowance will be taxed at the following rates:
- 7.5% on dividend income for basic rate tax payers; and
- 32.5% on dividend income for higher rate tax payers; and
- 38.1% on dividend income for additional tax payers;
If you exceed your tax-free Dividend Allowance you will need to tell HMRC or include your dividend income on your self assessment tax return should you need to complete one.
Changes to tax reporting of overseas clients
The Foreign Account Tax Compliance Act (FATCA) was implemented on the 1st July 2014, requiring us to obtain information on all customers potentially resident in or citizen of the United States (US) and report to the Internal Revenue Service (IRS) via HMRC. We have been reporting US investors to the IRS, via HMRC, since May 2015.
The implementation of Common Reporting Standards (CRS) on the 1st January 2016, requires us to obtain information on all customers potentially resident in multiple countries outside the United Kingdom (UK). In May 2017, the first CRS report will be submitted to the relevant global tax authorities via HMRC.
If you are invested in one of our products and have confirmed residency outside the UK, you may be included in reports to your country’s tax authority under FATCA & CRS. If we think you are resident (and for the US citizen) outside the UK, we will contact you to obtain the relevant tax information. If you do not provide this, you may still be reported.
*Only UK institutional clients and non-UK companies trading in the UK are eligible for gross income. Gross declarations will no longer be required for interest distributions earned on unit trust products.