What is a mutual fund distribution?

• Distributing funds usually pay income into your account as cash. In some cases, the fund manager may reinvest the distribution into additional units instead.
• Accumulating funds retain and reinvest income within the fund. This is reflected in the value of your existing units. You do not receive cash or additional units from the accumulation itself.

Outside a tax-exempt account such as an ISA, mutual fund distributions are usually treated as taxable income for UK tax purposes. They may be taxed as dividend income or interest income, depending on the fund's tax classification. Different tax rules and allowances apply to each. Whether you have tax to pay depends on your personal circumstances and any available allowances.

Your cost basis is the amount used to calculate your gain or loss for tax purposes when you sell an investment. It starts with your acquisition cost and may need to change to account for certain fund distributions.

No. Trading 212 does not make distribution-related cost basis adjustments to your existing units in either accumulating or distributing mutual funds.

You are responsible for calculating and recording any adjustments required for your tax purposes.

Depending on the applicable tax rules, accumulated income or equalisation may affect the cost basis you use when calculating a taxable gain or loss.

When you buy units partway through a fund's distribution period, the price may include income the fund earned before you bought them. Your first distribution may return part of the purchase price to you. This is called equalisation. It is a return of your own money and is not taxable income.

For example, under UK tax rules:

• Accumulated income that qualifies may be added to the cost of your accumulation units.
• Returned equalisation represents a return of part of your purchase price and may need to be deducted when calculating the cost for a future taxable disposal.

Receiving no cash does not necessarily mean there are no tax implications to consider.

Occasionally, the fund manager reinvests your distribution for additional units. A distribution is initially credited to your account as cash and later reclaimed after additional units are posted. The number of additional units you receive is based on the amount reinvested and the fund's NAV per unit on the payment date.

We record an acquisition cost for the new units added to your account. This does not adjust the cost basis of the units you already held.

You remain responsible for any distribution-related adjustments required for your tax records.

The cost and profit or loss figures shown in the app do not account for these distribution-related cost basis adjustments. You should not rely solely on them when calculating your taxable gain or loss.

Keep your transaction records and the fund's distribution information, including any income and equalisation amounts. Use these to calculate and record any required cost basis adjustments for your tax reporting.