Dividend tax changes HYP and US stocks

[1nvest]

I don't hold a HYP myself, but wondering are any opting to widen stock selections to include foreign stocks? US stocks for instance incur a 15% dividend withholding tax (assuming you've a W8-BEN registered i.e. are known to the US). UK dividend tax exemption amounts are dropping to £500 i.e. is being discounted and deflated away. Basic rate taxpayers will pay 8.75% dividend taxation

Strikes me that if you hold around 50/50 UK stocks and US stocks then the 15% US dividend withholding tax can be used to offset UK dividend taxation, such that the (withholding) tax already paid on US HYP shares negates UK stocks dividend taxation.

£100,000 invested £50,000 US stocks paying 4% dividends (£2000) and £50,000 UK stocks paying 4% dividends (£2000). US £2000 dividends having 15% withheld (£300). Total £3700 dividends received, £500 allowance = £3200 taxable dividends at 8.75% = £280 tax due. Less £300 of US dividend withholding tax already paid against US stock holdings, leaving no further tax payment to HMRC for dividends being due. Net dividends £3700.

If you just held £100,000 of UK stocks paying 4% dividend = £4000, less £500 allowance = £3500 taxable at 8.75% = £306 tax due (net dividends £3694). So near the same if you hold just UK stocks or 50/50 US/UK stocks, whereas before it was more tax efficient for UK investors to hold UK stocks.

In effect HMRC taxation changes are a incentive to sell hold more of US stocks under the new taxation regime than when UK dividends were less lightly taxed. Yet more disincentives induced by this current government who have already promoted a decline in GDP (graduates taxed at a high rate once they earn more than the minimum wage, GP's incentivised to retire once their LTA is reached, high/rising taxation inciting flight of capital (1% who pay a third of the income tax take)) and the apparent push for investors to diversify more widely and buy foreign listed stocks in combination with UK stocks rather than just buying UK listed stocks alone.

[Dod101]

I don't hold a HYP myself, but wondering are any opting to widen stock selections to include foreign stocks? US stocks for instance incur a 15% dividend withholding tax (assuming you've a W8-BEN registered i.e. are known to the US). UK dividend tax exemption amounts are dropping to £500 i.e. is being discounted and deflated away. Basic rate taxpayers will pay 8.75% dividend taxation

Strikes me that if you hold around 50/50 UK stocks and US stocks then the 15% US dividend withholding tax can be used to offset UK dividend taxation, such that the (withholding) tax already paid on US HYP shares negates UK stocks dividend taxation.

£100,000 invested £50,000 US stocks paying 4% dividends (£2000) and £50,000 UK stocks paying 4% dividends (£2000). US £2000 dividends having 15% withheld (£300). Total £3700 dividends received, £500 allowance = £3200 taxable dividends at 8.75% = £280 tax due. Less £300 of US dividend withholding tax already paid against US stock holdings, leaving no further tax payment to HMRC for dividends being due. Net dividends £3700.

If you just held £100,000 of UK stocks paying 4% dividend = £4000, less £500 allowance = £3500 taxable at 8.75% = £306 tax due (net dividends £3694). So near the same if you hold just UK stocks or 50/50 US/UK stocks, whereas before it was more tax efficient for UK investors to hold UK stocks.

In effect HMRC taxation changes are a incentive to sell hold more of US stocks under the new taxation regime than when UK dividends were less lightly taxed. Yet more disincentives induced by this current government who have already promoted a decline in GDP (graduates taxed at a high rate once they earn more than the minimum wage, GP's incentivised to retire once their LTA is reached, high/rising taxation inciting flight of capital (1% who pay a third of the income tax take)) and the apparent push for investors to diversify more widely and buy foreign listed stocks in combination with UK stocks rather than just buying UK listed stocks alone.

The tax changes are basically an incentive to maximise your holdings in an ISA or a SIPP.
Share investment is best not influenced by taxation. Taxation is a consequence of successful investing not a reason for it. [Deletion].

Dod

Moderator Message:
Unnecessary ad hominem observation removed. - Chris

[1nvest]

I don't hold a HYP myself, but wondering are any opting to widen stock selections to include foreign stocks? US stocks for instance incur a 15% dividend withholding tax (assuming you've a W8-BEN registered i.e. are known to the US). UK dividend tax exemption amounts are dropping to £500 i.e. is being discounted and deflated away. Basic rate taxpayers will pay 8.75% dividend taxation

Strikes me that if you hold around 50/50 UK stocks and US stocks then the 15% US dividend withholding tax can be used to offset UK dividend taxation, such that the (withholding) tax already paid on US HYP shares negates UK stocks dividend taxation.

£100,000 invested £50,000 US stocks paying 4% dividends (£2000) and £50,000 UK stocks paying 4% dividends (£2000). US £2000 dividends having 15% withheld (£300). Total £3700 dividends received, £500 allowance = £3200 taxable dividends at 8.75% = £280 tax due. Less £300 of US dividend withholding tax already paid against US stock holdings, leaving no further tax payment to HMRC for dividends being due. Net dividends £3700.

If you just held £100,000 of UK stocks paying 4% dividend = £4000, less £500 allowance = £3500 taxable at 8.75% = £306 tax due (net dividends £3694). So near the same if you hold just UK stocks or 50/50 US/UK stocks, whereas before it was more tax efficient for UK investors to hold UK stocks.

In effect HMRC taxation changes are a incentive to sell hold more of US stocks under the new taxation regime than when UK dividends were less lightly taxed. Yet more disincentives induced by this current government who have already promoted a decline in GDP (graduates taxed at a high rate once they earn more than the minimum wage, GP's incentivised to retire once their LTA is reached, high/rising taxation inciting flight of capital (1% who pay a third of the income tax take)) and the apparent push for investors to diversify more widely and buy foreign listed stocks in combination with UK stocks rather than just buying UK listed stocks alone.

The tax changes are basically an incentive to maximise your holdings in an ISA or a SIPP.
Share investment is best not influenced by taxation. Taxation is a consequence of successful investing not a reason for it. [Deletion]

Dod

Do you literally have to snipe everything I post!

[Dod101]

I don't hold a HYP myself, but wondering are any opting to widen stock selections to include foreign stocks? US stocks for instance incur a 15% dividend withholding tax (assuming you've a W8-BEN registered i.e. are known to the US). UK dividend tax exemption amounts are dropping to £500 i.e. is being discounted and deflated away. Basic rate taxpayers will pay 8.75% dividend taxation

Strikes me that if you hold around 50/50 UK stocks and US stocks then the 15% US dividend withholding tax can be used to offset UK dividend taxation, such that the (withholding) tax already paid on US HYP shares negates UK stocks dividend taxation.

£100,000 invested £50,000 US stocks paying 4% dividends (£2000) and £50,000 UK stocks paying 4% dividends (£2000). US £2000 dividends having 15% withheld (£300). Total £3700 dividends received, £500 allowance = £3200 taxable dividends at 8.75% = £280 tax due. Less £300 of US dividend withholding tax already paid against US stock holdings, leaving no further tax payment to HMRC for dividends being due. Net dividends £3700.

If you just held £100,000 of UK stocks paying 4% dividend = £4000, less £500 allowance = £3500 taxable at 8.75% = £306 tax due (net dividends £3694). So near the same if you hold just UK stocks or 50/50 US/UK stocks, whereas before it was more tax efficient for UK investors to hold UK stocks.

In effect HMRC taxation changes are a incentive to sell hold more of US stocks under the new taxation regime than when UK dividends were less lightly taxed. Yet more disincentives induced by this current government who have already promoted a decline in GDP (graduates taxed at a high rate once they earn more than the minimum wage, GP's incentivised to retire once their LTA is reached, high/rising taxation inciting flight of capital (1% who pay a third of the income tax take)) and the apparent push for investors to diversify more widely and buy foreign listed stocks in combination with UK stocks rather than just buying UK listed stocks alone.

The tax changes are basically an incentive to maximise your holdings in an ISA or a SIPP.
Share investment is best not influenced by taxation. Taxation is a consequence of successful investing not a reason for it. [Deletion]

Dod

Do you literally have to snipe everything I post!

Maybe we should both think first then.

Dod

[monabri]

Link to high(ish) US stocks

https://www.nerdwallet.com/article/inve ... end-stocks

- Interesting to compare the "yield on offer" to UK companies

How about Canada ( banks).

- "We" have more experience in our home market so probably feel more comfortable sticking to this side of the pond.

( sorry..have to dash out).

[Dod101]

Link to high(ish) US stocks

https://www.nerdwallet.com/article/inve ... end-stocks

- Interesting to compare the "yield on offer" to UK companies

How about Canada ( banks).

- "We" have more experience in our home market so probably feel more comfortable sticking to this side of the pond.

( sorry..have to dash out).

I hold both Toronto Dominion and Bank of Montreal. 2021 was a good year for capital appreciation, 2022 not so good although the weakening pound helped. Trailing yield for 2022 around 3.45%.

Dod

[1nvest]

Link to high(ish) US stocks

https://www.nerdwallet.com/article/inve ... end-stocks

- Interesting to compare the "yield on offer" to UK companies

How about Canada ( banks).

- "We" have more experience in our home market so probably feel more comfortable sticking to this side of the pond.

( sorry..have to dash out).

I used to hold US CHY, a convertibles shares outfit/fund, loved the regular monthly payouts typically of 10%/year. But then along came the EU insistence upon having to have KID's which few US funds provide. Combined with Robert Lichello's AIM, add-low/reduce-high, that worked very well for me during the years that I had held/traded CHY as the share price broadly flatlines in a moderately volatile manner.

I'm surprised that UK taxation changes promote holding less of UK stock, more of US/foreign stock, where much of the anticipated additional tax revenues could simply just line foreign based tax revenues (in effect costs less in net terms to add foreign holdings, whilst domestic holdings in net terms are reduced returns).