What is an Accumulation Unit? Are They Taxable?

What are the Accumulation Units?

Accumulation units are a type of share or a type of fund that provides the facility of automatically reinvesting your funds earned from an underlying portfolio. Furthermore, this type of scheme or fund in the UK reinvests the net amount, amount after taxes.

Are Accumulation Units Taxable?

Yes, accumulation units are taxable. The taxation of the accumulation units will be decided by the law in place.

What is the difference between Income and Accumulation Units?

An income is distributable, and any fund that pays a dividend is of the same nature. However, with accumulative funds or units, your income gets reinvested, and the amount of money that you earn is invested in the same fund, thereby growing your investment.

And when the investment is paid, you still have to pay income tax on the income even if it is an accumulated unit. However, when the dividend is paid for the accumulated unit, the unit book cost of the fund is increased and to ensure that there is a reduction in the corresponding capital gains.

Although your reinvested money will not be taxed, the income from these reinvested funds will be taxed as per the laws.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.