How will I Receive Dividends and Investment Income?
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. |
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. |
Share Dealing and ISA accounts
How are dividends paid in your IG Share Dealing or ISA account?
If you hold shares through IG's Share Dealing or ISA (Individual Savings Account) accounts, 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 and ISA 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
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
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.
Step 3 – Tax documents
IG will send UK domiciled clients a Consolidated Tax Certificate (CTC). This document is prepared in accordance with HMRC guidelines and summarises all dividend income (both UK and overseas), interest income, and other investment income paid on securities during the specified period.
These certificates are usually generated in May or June to cover the UK tax year that has just ended (ending 5th April), helping you with your tax reporting obligations.
What tax considerations apply?
Tax rules depend on your personal circumstances and can change.
- UK shares: Dividends are generally paid at 100%, with no tax deducted at source.
- Overseas shares: A withholding tax may be deducted before payment.
- ISA accounts: Dividends are tax-free for both UK and international shares, offering a significant advantage for income investors seeking domestic and overseas exposure.
Tax laws are subject to change and depend on your individual circumstances. In the UK, dividends on the majority of UK shares are paid at 100%. However, tax laws may differ in jurisdictions outside the UK. 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: 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 UK.
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.
In a nutshell: If you hold US shares, the Form W-8BEN determines how much tax is withheld on your dividends. US companies must withhold tax on payments to non-US residents.
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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 UK 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:
For example, if the net dividend is $425 USD and the GBP/USD exchange rate is 1.27, you would receive approximately $334.65 ($425 ÷ 1.27) credited to your GBP 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:
- Property Income Distributions are payments made by UK REITs from their tax-exempt property rental business.
- PIDs are treated as property income rather than dividend income for tax purposes.
- UK REITs are required to pay out at least 90% of their property rental profits as PIDs.
- PIDs are subject to 20% tax withholding at source (deducted before you receive the payment) for all non-ISA clients, regardless of tax bracket.
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.
In a nutshell:
Type | Description | Tax Treatment |
PIDs | Paid from the REIT's tax-exempt property rental business. At least 90% of rental profits must be distributed. | Treated as property income with 20% tax withheld at source for all non-ISA clients. |
Non-PIDs | Paid from non-rental business profits or other activities. | Treated as normal dividend income, usually without tax deducted at source. |
Both types of income will be detailed on your Consolidated Tax Certificate (CTC), 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 and ISA 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.
The exact timing depends on when IG's custodian or prime broker receives and processes the payment.
What happens if a company is liquidated?
Liquidation occurs when a company ceases operations and distributes its remaining assets to shareholders after paying off creditors. If you hold shares in a company that undergoes liquidation, you may receive liquidation proceeds based on your ownership stake.
For more information on liquidation refer to What Happens When Your Stock Gets Liquidated or Becomes Worthless? - IG UK
When a company is liquidated, its assets are sold, debts are repaid, and any remaining funds are distributed to shareholders.
- The amount you receive depends on what remains after all obligations are settled.
- Payments may happen in stages – interim and final distributions.
- Your proceeds appear after IG's custodian (for Share Dealing and ISA accounts) or prime broker (for leveraged accounts) has received and cleared the funds.
Because liquidation can take time, the full distribution process may span several months. Similar to dividend and interest payments, there may be a processing delay of 2-5 business days between the announced payment date and when the funds are credited to your account.
Leveraged Products: CFD and Spread Betting Accounts
What are leveraged products?
Leveraged products at IG include CFD (Contract for Difference) and spread betting accounts. Unlike Share Dealing and ISA accounts where you own the underlying shares, leveraged products allow you to speculate on price movements without owning the asset. Because of this difference, dividends and other corporate actions are handled through adjustments to your account rather than actual payments.
Key difference in processing: Share Dealing and ISA accounts hold positions with custodians, while leveraged products hedge positions with prime brokers. This affects how and when adjustments are processed. |
How do dividend adjustments work?
When you hold a leveraged position on shares that pay dividends, your account receives a dividend adjustment rather than the actual dividend payment.
For long positions | You receive a credit adjustment reflecting the dividend amount (minus applicable withholding tax). |
For short positions | You receive a debit adjustment, as you must pay the equivalent of the dividend. |
Timing: Dividend adjustments are typically applied on the ex-dividend date, not the payment date. This is different from Share Dealing accounts where actual cash arrives on or around the payment date. |
What tax considerations apply?
Tax treatment varies by product and location:
Spread Betting (UK clients):
- Dividend adjustments on UK shares are generally not subject to Capital Gains Tax
- Dividend adjustments on international shares are subject to tax, and withholding tax applies based on the country of incorporation
- Refer to the withholding tax rates in the spreadsheet data available to the AI
CFD accounts:
- Dividend adjustments are subject to withholding tax similar to Share Dealing accounts
- Withholding tax rates depend on the country of the underlying security
- The same international withholding tax rates apply (ranging from 0% to 37% depending on jurisdiction and security type)
Tax treatment depends on your individual circumstances and may be subject to change. Always consult with a qualified tax adviser regarding your specific situation. |
What are dividend adjustment corrections?
Sometimes companies revise their dividend amounts after the initial announcement. These revisions are market-wide updates that affect all shareholders and leveraged position holders.
When dividend rate revisions occur, IG adjusts affected accounts to maintain accuracy and communicates these changes to clients.
The correction process:
Step 1 – Reversal: The original dividend adjustment is reversed and removed from your account.
Step 2 – Reposting: A new adjustment reflecting the corrected dividend amount is posted to your account.
Step 3 – Notification: You'll see both transactions on your account statement, clearly showing the correction.
When this happens: Corrections typically occur after the ex-dividend date, once IG receives updated information from the market or prime brokers. While these adjustments are uncommon, they ensure all dividend figures match the final confirmed rates from the company. |
How are interest adjustments handled?
If you hold leveraged positions on interest-bearing securities (such as bonds or certain ETFs), you'll receive interest adjustments rather than direct coupon payments.
Processing timeline:
Your account balance is adjusted after IG's prime brokers receive and clear the funds from the underlying security issuer. This typically takes 2-5 business days after the official payment date.
Once the adjustment is posted, it will appear in your account statement and be reflected in your available margin or balance.
Key difference from Share Dealing: Share Dealing accounts receive actual cash payments from custodians, while leveraged accounts receive margin adjustments from prime brokers. |
What happens during company liquidations?
When a company on whose shares you hold a leveraged position undergoes liquidation, you'll receive a liquidation adjustment based on your position size and the final distribution amount. |
Liquidation occurs when a company ceases operations and distributes its remaining assets to shareholders after paying off creditors. If you hold shares in a company that undergoes liquidation, you may receive liquidation proceeds based on your ownership stake.
For more information on liquidation refer to What Happens When Your Stock Gets Liquidated or Becomes Worthless? - IG UK
How liquidation works:
- The company's assets are sold and debts repaid
- Remaining funds are distributed to shareholders
- Leveraged position holders receive an equivalent adjustment
Processing timeline:
Your account balance is adjusted after IG's prime brokers receive and clear the liquidation proceeds. Similar to dividend and interest adjustments, there may be a processing delay of 2-5 business days between the announced payment date and when the adjustment is credited to your account.
Staged payments: Liquidation can be a lengthy process spanning several months. You may receive:
- Interim adjustments as assets are gradually sold
- Final adjustment once the liquidation is complete
The adjustment amount depends on the company's residual value after all obligations are settled.
Key differences: Leveraged Products vs Share Dealing
Feature | Share Dealing / ISA | Leveraged Products |
What you receive | Actual dividend payments | Dividend adjustments to your position |
Timing | Payment date (2-5 days for clearing) | Ex-dividend date (adjustment applied) |
Processing through | Custodian | Prime broker |
Short positions | Not applicable | Debit adjustment (you pay) |
Tax treatment | Standard dividend tax rules | Varies: Spread betting (UK shares) generally CGT-free. |
Key Points to Remember For all accounts:
For Share Dealing and ISA accounts:
For Leveraged Products (CFD and Spread Betting):
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