This article is for educational purposes only and does not constitute financial advice. Always conduct your own research and consider consulting with a qualified financial adviser before making investment decisions.
What Are Dividends?
Dividends are payments that companies make to their shareholders as a way of sharing profits. When you own shares in a company, you become a part-owner of that business, and dividends represent your share of the company's success.
To be eligible for dividend payments, you must own shares at market close on the day before the ex-dividend date. This timing requirement is critical for determining whether you qualify to receive the upcoming dividend distribution
What are the key dividend dates?
Date | What it means |
Announcement date | The company declares the dividend amount and key dates. |
Ex-dividend date | This date serves as the cutoff date to be eligible for the dividend. You must own shares before this date to qualify for the payment. |
Record date | The company confirms who is on its register to receive the dividend. |
Payment date | The day the dividend is paid into your account. |
How are dividends paid in your IG Share Dealing account?
If you hold shares through IG's Share Dealing account, the dividend payment process follows a specific timeline. As soon as IG receives dividend payments for any shares you own, your account will be credited with the amount you are eligible for. This typically occurs on or around the dividend payment date announced by the company.
Note: Share Dealing accounts hold positions with custodians, while leveraged products (CFD and spread betting accounts) hedge positions with prime brokers. This difference may affect payment processing timelines.
Step 1 – Payment process
Step 1 – Payment process
When IG receives the dividends from its custodian, the amount is credited to your account. This usually happens on or around the official payment date announced by the company.
Since dividends are first paid to IG's custodian and must clear before transfer, your payment typically appears within 2-5 business days. For Share Dealing accounts, IG aims to post dividends on the payment date. However, in very rare scenarios, payments may be delayed due to the custodian model of allocation, as IG needs to receive the payments from the custodian before making payments to clients. This timing is dependent on when IG receives the cash credits from the custodian and is normal within the custodian model.
Step 2 – Using your dividend
Step 2 – Using your dividend
Once the payment appears in your ledger statement and is reflected in your available funds, you have complete flexibility in how to use these funds. You can:
Hold the cash in your account
Withdraw the funds
Reinvest by buying more shares
This flexibility allows shareholders to manage their investment strategy according to their financial goals.
What tax considerations apply?
Tax laws vary by jurisdiction and are subject to change. If you are resident outside the Republic of Ireland, different rules may apply. International shares are typically subject to withholding tax at the source, which means tax is deducted before you receive the dividend payment.
Tax treatment depends on your individual circumstances and may be subject to change. The information provided here is for educational purposes only. Always consult with a qualified tax adviser regarding your specific situation.
How does US dividend withholding tax work?
If you hold US shares, understanding the W-8BEN form is particularly important. US companies are required to withhold tax on dividends paid to non-US residents. The withholding rate depends on whether you have a valid W-8BEN form on file, creating a significant difference in the net dividend income received.
With a valid W-8BEN
With a valid W-8BEN
If you have completed and submitted a valid W-8BEN form (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting), you will be charged a reduced withholding tax rate of 15% on US dividends. This reduced rate is available due to the tax treaty between the US and Ireland.
Without a valid W-8BEN
Without a valid W-8BEN
If you do not have a valid W-8BEN form on file, the default withholding tax rate of 30% will be applied to your US dividend payments. This means significantly less dividend income reaching your account.
How long is the W-8BEN valid?
The W-8BEN form typically remains valid for three years from the date of signing, after which it needs to be renewed.
It's highly recommended that Irish residents holding US shares ensure they have a valid W-8BEN form submitted to benefit from the lower withholding rate.
Example: US Dividend Payment with Currency Conversion
The following example demonstrates the impact of W-8BEN status on dividend payments.
If you hold 100 Apple Inc. shares and the company pays a dividend of $5 per share:
| With valid W-8BEN | Without valid W-8BEN |
Gross dividend | $500 | $500 |
Withholding tax | 15% = $75 | 30% = $150 |
Net dividend (USD) | $425 | $350 |
Currency Conversion: If your base trading currency is Euro and the dividend is paid in USD, the net dividend amount will be converted to Euro using the current day's FX rate before being credited to your account.
For example, if the net dividend is $425 USD and the EUR/USD exchange rate is 1.27, you would receive approximately €334.65 ($425 ÷ 1.27) credited to your Euro account.
Tax treatment depends on your individual circumstances and may be subject to change. Always consult with a qualified tax adviser regarding your specific situation.
International Dividend Withholding Tax
Withholding tax rates vary significantly depending on the country of incorporation and the type of security, ranging from 0% to over 30% for most countries. Some special security types, such as Master Limited Partnerships (MLPs), may have higher rates.
For specific withholding tax rates for your investments, please contact IG support and ask about the country you're interested in.
What are Property Income Distributions (PIDs) and non-PID dividends?
When investing in Real Estate Investment Trusts (REITs) and similar property companies, it's important to understand the difference between PID and non-PID dividend income, as they are treated differently for tax purposes. This distinction can significantly affect your overall tax liability.
PID Income:
PID Income:
Property Income Distributions are payments made by UK Real Estate Investment Trusts (REITs) from their tax-exempt property rental business. This applies specifically to UK REITs and is governed by UK tax rules.
PIDs are treated as property income rather than dividend income for UK tax purposes.
UK REITs are required to pay out at least 90% of their property rental profits as PIDs.
PIDs are subject to 20% UK tax withholding at source (deducted before you receive the payment). Irish residents should consult a qualified tax adviser regarding how PID income is treated under Irish tax rules.
Non-PID Dividends:
Non-PID Dividends:
These are regular dividends paid by REITs from non-rental activities or by other companies.
Non-PID dividends are treated as standard dividend income and are subject to normal dividend tax rules.
They are typically paid without any tax being deducted at source.
Both types of income will be detailed on your tax documentation, helping you accurately report your income for tax purposes. Understanding which type of income you receive is essential for accurate tax reporting and planning.
Tax treatment depends on your individual circumstances and may be subject to change. Always consult with a qualified tax adviser regarding your specific situation.
How are interest payments credited?
If you hold interest-bearing securities (such as bonds), you'll receive coupon payments – periodic interest payments on your investment.
Your balance is adjusted after IG's custodian (for Share Dealing accounts) or prime broker (for leveraged accounts) receives and clears the funds.
Payments typically appear within 2-5 business days after the official payment date.
Once credited, the interest will show in your ledger statement and your available funds.
Spread bet and CFD accounts
What tax considerations apply?
Tax treatment varies by product and location:
Dividend adjustments on international shares are subject to tax, and withholding tax applies based on the country of incorporation.
How are dividends paid on spread bet and CFD accounts?
Spread bet and CFD accounts are derivative accounts used to speculate on price movements and don't receive cash dividends in the traditional way share dealing accounts do. Instead, 'dividend adjustments' are used to mitigate for the price movements of dividend payments. This ensures no profit nor loss is made from these price movements, as they're scheduled public events.