The only difference with investing in Bricklane.com via an ISA compared to a Standard account is the tax liability on your earnings. Returns and fees are all the same.
- Customers investing via an ISA pay no tax on their earnings.
- Customers investing via a Standard account may be liable to pay tax, depending on their personal circumstances.
Whilst Bricklane.com cannot give tax advice, the following information may be helpful:
Bricklane.com customers can earn a return in two ways:
- Change in property value (known as capital gains)
- Rental income (paid out as a quarterly dividend)
1. Capital Gains
If you sell your shares for an amount that is greater than that which you purchased them for, you may have to pay Capital Gains Tax on the gain.
UK taxpayers receive an annual tax-free allowance on Capital Gains Tax - this is £11,700 for the 2019/20 tax year i.e. annual capital gains below £11,700 will not be subject to Capital Gains Tax. This may vary in future tax years.
Since the funds are both classified as a REIT, dividends are split into two parts:
- Income generated from property rental
- Non-property income
If you invest via a Standard account, profits from the property rental income are paid to investors after a 20% tax deduction, which the REITs pay to HMRC. For UK resident individuals who complete tax returns, the property income dividend from a UK REIT is included as 'Other income' on your tax return.
Non-property profits e.g. interest earned on the cash held in the fund, are treated like a dividend on any Standard investment account. There is a £2,000 annual tax free dividend allowance for dividends paid in the 2019/20 tax year. Income tax is payable on dividends in excess of £2,000 pa.
Please note that all allowances and rules referred to above are subject to future change, and the above does not constitute tax advice.