Encashment tax for lower rate income tax payers

Hi Folks,
Have been using the holidays dowtime, flu and miserable weather to do a lot of reading here so thanks to all of you for the many insightful contributions.

One insight that I have picked up is that it seems to make sense for my spouse to open a brokerage account to allow them hold some income generating funds/equities to make better / full use of SRCOP / income tax relief. (we are jointly assessed, they are a v low income earner)

I am thinking that this could be a place to drip feed savings overtime and build up the income flow.

An Investment trust seems the best approach ( ETFs = too messy for us to keep track of deemed disposal 8 yrs from now, and don't want risk /stress of stock picking, want to invest in a passive index vs actively managed, and don't know of other options that wont incur high fees )

However .. I have just read about 'Irish Encashment tax' @ 25% which would be deducted at source by the broker.

I am sure i am missing something but can anyone advise on which tax rate would apply for a lower rate irish taxpayer, receiving dividends from a UK Investment Trust ? The standard income tax rate of 20% ? Encashment Tax of 25% .. or both ?

I have seen here that there is a Dividend Withholding Tax deducted on UK Dividends, by the broker, but does this DWT apply to an IT ?

and for Capital Gains realised from that Trust = standard 33% ?




thanks
T

Encashment tax is fully refundable against income tax & USC. Not sure about PRSI. It is therefore a withholding tax mechanism and very similar to a payment on account. There is no UK DWT on UK dividends and, yes, CGT on sale of shares are liable to standard rate CGT. The only word of advice I would give is make sure that you buy an investment trust and not an ETF. These are presented in a very similar way on most websites. I'd suggest looking for a KIID (Key Investor Information Document or something similar) on the trust. Do a search for words like UCITS or SICAV or closed end fund and if these appear then you an offshore fund (and it will not be an investment trust).