Became a US Citizen in 2022 and just heard about PFICs...I have £17k GBP in Vanguard UK, how should I treat them?

[mrcb]

Hello everybody, I became a US Citizen (UK by birth) back in 2022 and had no idea what a PFIC was, or how this could potentially be an issue for me in the future.

I am reading that I may have a tax issue with an old UK Vanguard account that I do not touch. I have not touched / invested in it since 2018.

From what I can see, I hold 6 funds, all with ISINs starting with GB or IE (Which I believe is a clear sign of a PFIC), and the amount held across them is £17,100 ... $22,400 at todays exchange. 70% of this (£7k) are gains.

I hope I am not the first to say, but anything that I read online is not making it clear on what I should be doing with these. Ideally, I would liquidate them and re-invest in my US brokerage account in US funds (That will be HMRC reporting funds), however, I am not sure what event(s) this would trigger?

I also saw that if the value is under $25k, I do not need to do anything?

Can anybody here help me with what I should / should not be doing? Will this trigger another filing form to the IRS, or am I safe here because the value is under $25k? How will the sale / gain be taxed? 5 of the accounts are accumulating. 1 is distributing.

I file married jointly if that matters. My wife is a USC by birth.

Thanks in advance for any help on the topic.

[halfnine]

US citizenship isn't the only criteria. The tax clock also starts ticking if you become a US resident or your spouse files jointly. Additionally, depending on the foreign assets and threshold, there are also reporting requirements separate to tax filings (FBAR, Form 8938, etc) that also would start when one becomes a US resident. Although, I have no idea whether these reporting requirements would be required for someone whose spouse files jointly but in which the foreign accounts are solely owned by a non-resident, non-citizen spouse.

Since you are already past due irregardless I would suggest enlisting the help of a professional as penalties can be quite malicious and a pro would be best at plotting the correct course of action to get any issues remedied.

[aspiring_kiwi]

Another vote here to seek professional advice. You've got PFIC issues, and the penalties can be quite punitive. You might also have FBAR/FATCA issues if you haven't been on top of that.

As a US citizen with assets overseas, these 2 wiki articles are well worth reading:

https://www.bogleheads.org/wiki/US_tax_ ... ing_abroad
https://www.bogleheads.org/wiki/Taxatio ... ing_abroad

[mrcb]

Another vote here to seek professional advice. You've got PFIC issues, and the penalties can be quite punitive. You might also have FBAR/FATCA issues if you haven't been on top of that.

As a US citizen with assets overseas, these 2 wiki articles are well worth reading:

https://www.bogleheads.org/wiki/US_tax_ ... ing_abroad
https://www.bogleheads.org/wiki/Taxatio ... ing_abroad

Thank you for your response.
Can you summarize what you mean by "PFIC issues". This is all I see online, but what exactly is the "issue"?

I.e. I have £7k gains. Am I going to be in a position where I have to pay tens of thousands of dollars in penalties? That to me is an issue.
Or, am I going to be in a position where potentially 50-80% of my £7k gain will go to tax, and therefore I recover close to my cost basis only? For me, this is not an issue. Not ideal, sure, but not the end of the world?

[TedSwippet]

I also saw that if the value is under $25k, I do not need to do anything?

There is a $25k 'de minimis' exemption ($50k if MFJ) for annual PFIC reporting on form 8621, but this only applies where there are no 'excess distributions' from the fund. The definition of 'excess distribution' is fiddly, but something as simple as a dividend (even if accumulated) could qualify. Sale of units almost certainly qualifies.

Can anybody here help me with what I should / should not be doing? Will this trigger another filing form to the IRS, or am I safe here because the value is under $25k? How will the sale / gain be taxed? 5 of the accounts are accumulating. 1 is distributing.

Without a mark-to-market election, you'll be stuck with the default and confiscatory section 1291 tax rule:

Section 1291 of the US Code is the tax rule which generates particularly unfavorable treatment.[6] It taxes "ordinary" distributions as dividends. Any distribution which is more than 125% of the average for the previous three years is considered an "excess" distribution, as is any gain received on the sale. Excess distributions are treated as if they were prorated over the entire holding period, and for previous years it is taxed at the maximum personal tax rate for that year, not your personal rate, plus interest at the normal rate on tax underpayments. You cannot deduct losses against the excess distributions on sales with gains; they would be deducted only as regular capital losses.

Because of the interest, your effective tax rate on the gain from a long-term holding could reach or even exceed 100%.[7]

Going forward, you could either 'purge' the PFIC to move to mark-to-market for the future, or (usually far better) just sell and reinvest what's left after rapacious PFIC tax into local US domiciled funds or ETFs. Either way, you're probably also going to have to spend either a lot of time or a lot of money to complete multiple copies of form 8621.

I file married jointly if that matters. My wife is a USC by birth.

Aside from the higher exemption for annual PFIC filing, no significant difference. Marrying a US citizen and filing MFJ does not work around the PFIC issue; rather, it just drags them into it as well.

As already noted upthread, PFIC issues don't start with US citizenship. They begin as soon as you become any form of 'US taxable person'. The standard advice is to ditch any and all PFICs before having any contact whatsoever with the US's tax system.

I am reading that I may have a tax issue with an old UK Vanguard account that I do not touch. I have not touched / invested in it since 2018.

Finally, I take it that Vanguard UK does not know you are a US citizen. It has a blanket ban on US persons holding accounts with them:

1.3.3. Our Accounts and the Vanguard Funds are not available under these Terms to US persons. “US persons” include any citizen of the United States of America (US), any person holding a US passport (regardless of residency or domicile), and any person who has an obligation to pay tax to the US tax authorities on their worldwide income. If you are or you become a US person we may restrict investment dealing on your Vanguard Funds and the services we offer you and inform the relevant authorities. For an ISA or a General Account only, we may alternatively sell your Vanguard Funds and close your Account.

[mrcb]

Thank you Ted for your response. So it seems I should be hiring a tax service here in the UK, which I will definitely do.

From a reporting stand point, this will only create issues with the IRS, not HMRC (UK authorities) also?

My 2023 US taxes are being finalized as we speak (I have an extension on my 2023 taxes). Would you inform my US preparer that they need to do something for these PFICs now, or will this be a 2024 US tax item if I were to liquidate them this year?

Finally, are you able to help me understand in laymans terms what is the worst case scenario here?
Is it tens of thousands of dollars in penalties, or is it potentially having to pay all of my £7k gains to tax?

[Valuethinker]

Thank you Ted for your response. So it seems I should be hiring a tax service here in the UK, which I will definitely do.

From a reporting stand point, this will only create issues with the IRS, not HMRC (UK authorities) also?

My 2023 US taxes are being finalized as we speak (I have an extension on my 2023 taxes). Would you inform my US preparer that they need to do something for these PFICs now, or will this be a 2024 US tax item if I were to liquidate them this year?

Finally, are you able to help me understand in laymans terms what is the worst case scenario here?
Is it tens of thousands of dollars in penalties, or is it potentially having to pay all of my £7k gains to tax?

On the UK side, if you are non-resident in the UK, then this should be fairly elementary (I don't know if there's any interaction with student loans, upon emigration). Don't know how it works if you emigrated part way through a tax year? But that should still be fairly simple. It's just the date when you are non resident. And taking money out of an ISA incurs no tax penalty.

Ted S knows far more about this than me. But basically you need to kill this thing - ie sell it. Cash you should reinvest through a US broker in the USA - avoiding these horrendous problems. What I don't know is if there is a better or worse way how/when to liquidate it.

Take Ted S's advice over mine, to be clear, if he contradicts.

[TedSwippet]

Thank you Ted for your response. So it seems I should be hiring a tax service here in the UK, which I will definitely do.

From a reporting stand point, this will only create issues with the IRS, not HMRC (UK authorities) also?

Ah, so you're a UK resident, not a US one? (Okay, just wasn't fully clear from your original post.) If yes, you'll want to read these wiki articles as well:

- Investing from the UK for US citizens and US permanent residents - Bogleheads
- US domiciled ETFs that are UK HMRC reporting funds - Bogleheads

Your existing holdings shouldn't cause much in the way of UK tax problems (although outside of an ISA or SIPP, an accumulating fund can be a UK tax computation bugbear, since the 'notional' dividends are taxable annually even though not received directly). Overall, they're fine from the UK perspective. The main problem is punitive extraterritorial US citizenship-based tax rules.

My 2023 US taxes are being finalized as we speak (I have an extension on my 2023 taxes). Would you inform my US preparer that they need to do something for these PFICs now, or will this be a 2024 US tax item if I were to liquidate them this year?

Impossible to say from here whether or not you have a 2023 (and past years) filing requirement (or problem) with your PFICs. As above, annual reporting hinges on 'excess distributions', which you may or may not have. The only way to tell is to grind through the numbers, or have your preparer do that for you. Specifically for accumulation units it may well be a challenge to match up 'notional' dividends with the US definition of an 'excess distribution'.

Finally, are you able to help me understand in laymans terms what is the worst case scenario here?
Is it tens of thousands of dollars in penalties, or is it potentially having to pay all of my £7k gains to tax?

As far as I know, the only penalty for failing to file informational annual PFIC forms is that the return stays open indefinitely for audit. As long as there's nothing else amiss then provided you have no past year 'excess distributions'(?) you could be okay on that score. The real teeth appear when you have a reportable gain. At that stage you pay income tax on the gains at the highest rates in existence, spread across the years you held the PFIC and with interest added for past years. This combination could generate a tax rate well above 50%, with 100% or more possible.

Again though, the only way to assess the damage is to grind through the numbers. A lot depends on how long you held these funds for.

[mrcb]

Thank you Ted.
I have just been digging through my statements since the accounts opened.

From what I can see, I have 5 funds that are Accumulating and 1 fund that is Distributing.

For the 5 accumulating, if I look at my year end statements it states that I have been receiving £150-200 or so each year in dividends, however, I do not see that hit my cash balance, nor do I see my holdings increase in the fund since the day I bought them. Therefore surely this means I have not been receiving a distribution at all?

I then looked at the performance tab in Vanguard, and if I go back to when I opened the account to todays date:

I can see my initial cost basis of £10,000 across the 6 funds, a realized gain of only £0.06 (between 2 of them), income of £6.5 interest in the cash holding, and £220.16 from the 1 singular distributing fund. I have £0 income for each of the accumulating funds in the income column (which backs up my point above about receiving no distributions?)

I am hoping that this is going to make things easier for me?

At present, I am living back in the UK (Since summer of last year). Since I have lived back in the UK, I have only invested spare cash into UK HMRC funds via my US based investment provider. I only invest in a UK pension here in the UK. Other than the PFIC issue above, I have no other investments in the UK.

[halfnine]

As long as you have a US citizen spouse and file jointly you will continue to be susceptible to PFIC issues regardless of your country of residency.

edit below

Forgot OP was a US citizen so it doesn't matter anyway. See below.

[TedSwippet]

For the 5 accumulating, if I look at my year end statements it states that I have been receiving £150-200 or so each year in dividends, however, I do not see that hit my cash balance, nor do I see my holdings increase in the fund since the day I bought them. Therefore surely this means I have not been receiving a distribution at all?

Not so. Your dividends have been automagically rolled up into the accumulation fund's NAV. However, for UK tax purposes, unless you held these inside an ISA, the dividends you didn't receive are still taxable annually. You then get to subtract these out for CGT, so that you are not double-taxed. See this article for full details:

Accumulation units – tax on reinvested dividends UK - Monevator

Are reinvested dividends taxable in the UK? Sadly, yes. Fund accumulation units attract income tax on dividends and interest at the same rates as their more transparent ‘income unit’ cousins.

Which means that you owe dividend income tax (or income tax on interest in the case of bond funds) even though you don’t physically receive a payout to your bank account.

Indeed the taxman still wants his cut despite many accumulation class funds showing zero dividend distributions on their webpages.

The result of this, in the UK at least, is that accumulation and distribution units produce the precise same tax outcome. The difference is one of cash flow; you have to pay tax on the 'notional' dividends even though you haven't (yet) received them. Mostly that'll be just nuisance, but you could probably construct some edge cases where there is not enough other cash to cover this, at which point it becomes much more of a headache.

Personally I just avoid it by using only distributing units outside ISAs and SIPPs; reasonable general advice for most UK investors.

I am hoping that this is going to make things easier for me?

It doesn't look that way at the moment. Assuming these holdings are outside an ISA (and SIPP or other pension), on top of your US PFIC woes you may now also have a bit of a UK tax difficulty to unravel. As a general rule, for UK tax alone you want to avoid accumulation funds and ETFs in a non-sheltered general investing account.

They're not impossible to handle here, but they are annoying and fiddly. For US tax, probably doubly so, especially when throwing PFIC and foreign tax credits into the mix. I really don't know offhand how you'd handle this confection of misaligned tax rules correctly. (Pray to whatever deity you subscribe to that you do not also have any US state tax to layer on top of all of this.)

At present, I am living back in the UK (Since summer of last year). Since I have lived back in the UK, I have only invested spare cash into UK HMRC funds via my US based investment provider.

Into HMRC reporting status funds, presumably? Okay from both the US and UK perspective, at least in the sense that they do not fall into either country's tax trap. Still a potential large workload to deal with tax on both sides of the pond.

(Personal note: US is the only second citizenship for which I have ever been eligible, and I declined to take it when available purely because of this worldwide and lifelong US tax entanglement nonsense. Had it been any other country offering me a second citizenship, I would likely have grasped it with both hands.)

I only invest in a UK pension here in the UK. Other than the PFIC issue above, I have no other investments in the UK.

Your pension should be fine, although even here there can be some ugly annual US tax filing to do, even if no actual US tax liability until withdrawals. Also, you can probably say goodbye to any chance of a 25% tax-free lump sum from the pension; while free of UK tax, the US generally does not see it that way.

[TedSwippet]

As long as you have a US citizen spouse and file jointly you will continue to be susceptible to PFIC issues regardless of your country of residency.

The OP is a US citizen. MFS won't help them, then. Nor will divorce! :-(

[halfnine]

As long as you have a US citizen spouse and file jointly you will continue to be susceptible to PFIC issues regardless of your country of residency.

The OP is a US citizen. MFS won't help them, then. Nor will divorce!

I forgot the part where they recently became a citizen

[mrcb]

Ted, first of all, thank you so much for your responses. This is very helpful and I am learning a ton.

I am however finding it hard to summarize what I think my position is, and probably next steps / best course of action.

Would you be able to take a look at the below and let me know if you agree, or modify as you see fit:

Step 1: Sell my holdings, recognize the gains of ~£7,000, and start to wind down the impact of all of this fun stuff

Then, from a US perspective as of 2023:

1. Inform my tax preparer who are finalizing my US returns that I have not filed form 8621 since I became a US tax resident.

2. My 2023 US tax preparer would submit am 8621 for each year from 2018 for this 1 singular distributing fund. I believe they do not need to do a form for each of the other 5, as I did not receive a distribution?

3. My exposure here, is on the 1 singular distributing fund that I have been holding since 2018, and for which I received distributions of ~£30 a year in dividends. Nothing on the 5 accumulating as I didn't receive a distribution?

4. My US exposure as of today, would be on 6 years of ~£30 a year income ... Minimal by my standards


From a UK perspective:

1. I most likely will have a UK tax issue on gains from the 1 singular distributing fund, plus, the 5 accumulating funds? I estimate this to be 6 x £30 and 6 x £150.

2. These funds are not in an ISA, just a standard investment account.

3. As I will sell the funds this week, I will declare the £7k gains on my 24/25 UK tax self assessment, and pay taxes (I imagine 45%) next year?


From a US perspective for 2024:

1. I will then declare the total gain of the £7k next year to the US, and I would have to file 8621 for all 6 of the funds?

2. Tax would be due to the US on this, and also to the UK, in theory double tax, but this is something that I should be able to offset with a credit in my next US tax return as I would be paying a higher rate to the UK?


Anything that I am significantly missing here or understanding incorrectly?

[Valuethinker]

From a UK perspective:

1. I most likely will have a UK tax issue on gains from the 1 singular distributing fund, plus, the 5 accumulating funds? I estimate this to be 6 x £30 and 6 x £150.

So well within the annual CGT exemption. So no tax to actually pay on capital gains (you do need to report it).
However there will be tax on the income in the accumulating funds and you will have to go back and try to figure that out.

2. These funds are not in an ISA, just a standard investment account.

So they are taxable. That's why we recommend against holding Accumulating Funds in a standard investment account.

3. As I will sell the funds this week, I will declare the £7k gains on my 24/25 UK tax self assessment, and pay taxes (I imagine 45%) next year?

If they are in an ISA, then no tax to pay on gains. So this is only true if outside an ISA (for UK tax).

Capital gains tax rate is currently 20%, not your marginal income tax rate. Ms. Reeves may well change that - given what she has been saying in Parliament. But for this tax year, you should be OK.

From a US perspective for 2024:

1. I will then declare the total gain of the £7k next year to the US, and I would have to file 8621 for all 6 of the funds?

2. Tax would be due to the US on this, and also to the UK, in theory double tax, but this is something that I should be able to offset with a credit in my next US tax return as I would be paying a higher rate to the UK?


Anything that I am significantly missing here or understanding incorrectly?

My understanding is you would get a credit against US tax from the tax you pay in the UK. One complication is the different tax years (31 Dec v 5th of April).

As Ted Swippet indicates above, pensions *should* be exempt from US PFIC tax problem. So a strategy of maximising UK pension contributions may be prudent. However that does mean locking the money up until age 57: there's very little scope to draw down earlier than that (terminal illness might be one - so let's hope not). Also there are limits (and clawback of allowances if you are on the 45% tax bracket).

[mrcb]

I am learning even more from this thread! Thank you for your responses.

For your first response. You mean that I would need to report both the distributing fund dividends and the accumulating fund dividends to HMRC for the prior years, but in regards to CGT, I would only pay 20% on the accumulating fund distributions (6yrs x £150 a year roughly). I would not pay CGT on the distributing fund dividends (6yrs x £30 a year) as the amount it not material.

None of the funds are within an ISA. So if I close them out this week, my UK liability for 24/25 will be anything from the above point (The CGT on the 2018-2024 accumulating dividends) plus 20% CGT on the total £7k gain that I currently have? Wouldn't £6k of this be exempt from the CGT exemption that you made me aware of?

I also would expect a credit at some point, but I fully agree with you that the timing of tax years makes this a problem. A smaller issue in the grand scheme of things at the minute.

[TedSwippet]

Then, from a US perspective as of 2023:

1. Inform my tax preparer who are finalizing my US returns that I have not filed form 8621 since I became a US tax resident.

Guess so. Or alternatively, if you told them that you held these funds in Vanguard UK, ask them why they did not pick up on this earlier.

2. My 2023 US tax preparer would submit am 8621 for each year from 2018 for this 1 singular distributing fund. I believe they do not need to do a form for each of the other 5, as I did not receive a distribution?

Don't know. HMRC refers to dividends that are UK taxable but automagically reinvested by accumulating funds as a 'notional dividend'. Given that you didn't see the money as cash, you might I suppose be able to construct a cogent and logical argument that a 'notional dividend' is not an IRS 'excess distribution'.

However, logic and coherency are not even minor elements of US tax laws, so it's anyone's guess whether or not this might succeed. Also, the US is famous for pulling obscure rules out of its back pocket when you least expect it (exhibit A: PFIC), so there may be some rule or another on this I've not seen.

It'll be interesting (in the Chinese curse sense) to see what your US tax preparer does with this information.

3. My exposure here, is on the 1 singular distributing fund that I have been holding since 2018, and for which I received distributions of ~£30 a year in dividends. Nothing on the 5 accumulating as I didn't receive a distribution?

Perhaps, though see above. Annoyingly, your cost of tax preparation for this £30 of annual 'excess distribution' (if indeed it is) will far exceed the dividends you received. Multiplied by six if it turns out that accumulated dividends are also 'excess distributions'.

4. My US exposure as of today, would be on 6 years of ~£30 a year income ... Minimal by my standards

Again, perhaps. But only because PFIC stores up nearly all of its pain until you sell, renounce US citizenship, or some other terminating event.

From a UK perspective:

1. I most likely will have a UK tax issue on gains from the 1 singular distributing fund, plus, the 5 accumulating funds? I estimate this to be 6 x £30 and 6 x £150.

UK tax rates on dividends are 8% or so basic rate, and 33% or so higher rate. They don't match ordinary income tax rates. There is also a (small, shrinking) separate dividend tax-free allowance, £1k or so in previous years, now £500 (from memory; too lazy to check accurate figures).

2. These funds are not in an ISA, just a standard investment account.

Unlucky. Except of course that the US ignores ISA wrappers, so for you there are still significant problems.

3. As I will sell the funds this week, I will declare the £7k gains on my 24/25 UK tax self assessment, and pay taxes (I imagine 45%) next year?

As noted by Valuethinker upthread, not 40% or 45% but lower. There is a £3k UK tax-free allowance on capital gains, so say 20% (higher rate) on £4k, so £800 or so.

Don't forget to subtract out from your capital gains the dividends on which you paid UK tax in 1 above. (Or, add these dividends to your cost basis; same difference.) Otherwise you're paying double tax on the reinvested dividends.

From a US perspective for 2024:

1. I will then declare the total gain of the £7k next year to the US, and I would have to file 8621 for all 6 of the funds?

Yes. This is where the dragons manifest. You pay the highest US income tax rates in existence on the capital gain, with additional interest for apportioning the money to previous years. Not to mention perhaps forking over more than £1k in 8621 preparation fees. Prepare to see at least 50-70% of your gains disappear here in tax and fees.

2. Tax would be due to the US on this, and also to the UK, in theory double tax, but this is something that I should be able to offset with a credit in my next US tax return as I would be paying a higher rate to the UK?

The UK is the primary taxing authority here. The offset tax years, and timing issues of having to go back and amend both UK and potentially US tax returns may limit your ability to claim US foreign tax credits, so prepare for the possibility of at least some double-tax. On this specific capital gain, because of PFIC you will end up paying a far higher tax rate to the US than to the UK.

My guess is that shiny US citizenship you took in 2022 is starting to look a bit tarnished by now. Did you consider alternatives at the time? For example, as the spouse of a US citizen you have an automatic right to go back and live in the US (green card), so assuming you don't foresee divorce(!) you could potentially have delayed taking out US citizenship until later, leaving you free to invest however you want in the interim.

[halfnine]

I am not entirely convinced that the OP due to past or current work in the UK and the existence of a pension plan has not at some point either due to the transfer of cash or via total values hasn't tripped thresholds for the FBAR or Form 8938.

[Valuethinker]

I am learning even more from this thread! Thank you for your responses.

For your first response. You mean that I would need to report both the distributing fund dividends and the accumulating fund dividends to HMRC for the prior years, but in regards to CGT, I would only pay 20% on the accumulating fund distributions (6yrs x £150 a year roughly). I would not pay CGT on the distributing fund dividends (6yrs x £30 a year) as the amount it not material.

Income from the funds should be reported in the year that it was earned - whether dividends or interest. With accumulating funds, you have to figure out what that was (with Distributing funds, it's just the dividend payment**).

"Accumulating fund distributions" - was this a repayment of capital? In which case, it will give rise to a capital gain, which you report on in the year it was distributed (I believe). Other capital gains are reported in the year in which you realise - ie sell the funds. Note however that your capital gain is, I believe, what you sold the fund units for minus what you bought them for, but adjusting the sale price for the increase in NAV arising from dividends that the fund earned (that you have already paid tax on in previous years!). You can see why Accumulating funds in taxable accounts are a bit of a record keeping nightmare!

None of the funds are within an ISA. So if I close them out this week, my UK liability for 24/25 will be anything from the above point (The CGT on the 2018-2024 accumulating dividends) plus 20% CGT on the total £7k gain that I currently have? Wouldn't £6k of this be exempt from the CGT exemption that you made me aware of?

Capital gains will be. Dividends are a different category and different rules apply. The CGT exemption has been lowered and I missed that - see Ted Swippet's post. So CGT above £3k pa of realised gains (it can pay to realise say £3k in March and the balance in April, thus in a new tax year. But your real problem is US PFIC? So you need to resolve that as quickly as you can (I believe)).

I also would expect a credit at some point, but I fully agree with you that the timing of tax years makes this a problem. A smaller issue in the grand scheme of things at the minute.

** there's another complexity there which was posted about here, and I don't fully understand it. A distributing fund can earn income on its investments, and not pay it out to fund holders, and that income is still reportable and taxable for the fund holders. But as I say, I wasn't aware of this complexity (and my accountant never asked me for more information on my holdings).

[halfnine]

I admit I am not up to speed here on what tax years we are referrring to relevant to the UK, but if we are talking about all the years from 2018 to current day then what is taxable and what isn't is going to depend on his residency status during those years. Additionally capital gain exemptions and personal allowances in some years might not be allowed again depending on residency or potentially domicile status. And, my recollection from looking at these issues for my sister, was that if OP was gone less than 5 years(?) (among other criteria) the capital gains that were previously not taxable might all be rolled into the current year. My knowledge on all this is hazy but OP really needs to go year by year to work out their current obligations.

[TedSwippet]

"Accumulating fund distributions" - was this a repayment of capital? In which case, it will give rise to a capital gain, which you report on in the year it was distributed (I believe). Other capital gains are reported in the year in which you realise - ie sell the funds. Note however that your capital gain is, I believe, what you sold the fund units for minus what you bought them for, but adjusting the sale price for the increase in NAV arising from dividends that the fund earned (that you have already paid tax on in previous years!). You can see why Accumulating funds in taxable accounts are a bit of a record keeping nightmare!

This seems muddled somehow. Here is what you might receive -- or be 'deemed' to have received -- from a UK unit trust, OEIC, or ETF:

• Equalisation. This is a pure return of capital, potentially paid if you made purchases made part way through the dividend accounting period. Only applies to unit trusts and OEICS, not ETFs. Not taxable, either as a dividend or as capital gain. You subtract it from your cost basis for CGT.
• Paid dividend. From any distributing funds or ETFs. Taxable in the year of receipt.
• Excess reportable income. Applies only to non-UK domiciled funds and ETFs. In practice, this would be all ETFs, because they base in Ireland or Luxembourg. Some OEICs are UK domiciled, but those that aren't may also have ERI. Taxable in the year of receipt, as with dividends above. Subtract out for CGT because they aren't actually distributed to you, but essentially reinvested. Can be hard information to uncover, since the platform often doesn't report it; in which case you have to read the fund providers information. Usually small for distributing funds and ETFs (but not for accumulating ones; see below).
• Notional dividend. From any accumulating funds or ETFs. Taxable in the year they accrue ('deemed'). Most fund managers report these as ERI, so treat as above. That is, annual tax -- pretend dividend on which tax is payable with real money! -- and subtract out for later CGT.

And yes, it's a mess overall. Four different things to watch for and track. And all of this before even considering the US's overbearing citizenship based tax and its horrible PFIC nonsense on top, where applicable.

[Valuethinker]

"Accumulating fund distributions" - was this a repayment of capital? In which case, it will give rise to a capital gain, which you report on in the year it was distributed (I believe). Other capital gains are reported in the year in which you realise - ie sell the funds. Note however that your capital gain is, I believe, what you sold the fund units for minus what you bought them for, but adjusting the sale price for the increase in NAV arising from dividends that the fund earned (that you have already paid tax on in previous years!). You can see why Accumulating funds in taxable accounts are a bit of a record keeping nightmare!

This seems muddled somehow. Here is what you might receive -- or be 'deemed' to have received -- from a UK unit trust, OEIC, or ETF:

• Equalisation. This is a pure return of capital, potentially paid if you made purchases made part way through the dividend accounting period. Only applies to unit trusts and OEICS, not ETFs. Not taxable, either as a dividend or as capital gain. You subtract it from your cost basis for CGT.
• Paid dividend. From any distributing funds or ETFs. Taxable in the year of receipt.
• Excess reportable income. Applies only to non-UK domiciled funds and ETFs. In practice, this would be all ETFs, because they base in Ireland or Luxembourg. Some OEICs are UK domiciled, but those that aren't may also have ERI. Taxable in the year of receipt, as with dividends above. Subtract out for CGT because they aren't actually distributed to you, but essentially reinvested. Can be hard information to uncover, since the platform often doesn't report it; in which case you have to read the fund providers information. Usually small for distributing funds and ETFs (but not for accumulating ones; see below).
• Notional dividend. From any accumulating funds or ETFs. Taxable in the year they accrue ('deemed'). Most fund managers report these as ERI, so treat as above. That is, annual tax -- pretend dividend on which tax is payable with real money! -- and subtract out for later CGT.

And yes, it's a mess overall. Four different things to watch for and track. And all of this before even considering the US's overbearing citizenship based tax and its horrible PFIC nonsense on top, where applicable.

Thank you for the corrections.