Just so I understand the part I've quoted you on above - there is a 15% tax on dvidends for US shares held in a UK ISA?
If I have understood that correctly, I have a question about that.
I've got quite a bit of money in this fund in my stocks and shares ISA - https://www.vanguard.co.uk/uk/portal/detail/mf/overview?portId=9218&assetCode=EQUITY##overview
The fund is domiciled in the UK but tracks the S&P Total Market Index which is based in the US.
Will I be paying 15% tax on my dividends?
I'm no expert, so don't rely on the following being correct, but my understanding is as follows.
This is a not a US share. It's an investment in a UK based OEIC. That particular fund is not paying you dividends, the dividends are re-invested. So the benefit of the ISA wrapper is that you avoid capital gains tax.
After that, it all gets a bit complicated. There's 3 factors.
- where the investor is based and what taxes they personally pay. In this case, that's simple - it's an ISA and you have no extra tax to pay, (the fund is one that is tagged as "reporting" or "distributing.")
- where the fund is "domiciled" and what tax treaties it can take advantage of. In your case, that's the UK.
- where the actual income or profits are coming from and whether they have withholding taxes and similar. In this case, that's the USA and the fund itself is paying the tax.
As I understand it, the S&P-500 net total return index that you're tracking is calculated assuming that 30% dividend tax is being paid. In reality, the fund is only paying ~15% dividend tax in the US and that extra money is used by them to reduce the tracking error. If you look at the pdfs on the side of the page you link to, there'll be plenty more detail about exactly how much is being paid etc. Remember that the biggest holdings (Apple, Google etc.) mostly don't pay dividends, so the overall dividend yield isn't a high amount (1.56%).
So in summary, yes, 15% dividend tax is being taken off before you even see it, but there's nothing you can do about it and it has a relatively small effect (15% of 1.56% is 0.23% p.a). Only time you should think about it is if you have other investments outside the ISA wrapper, because it might make sense to shelter those ahead of US investments.