Vanguard UK lets you invest in the S&P 500 index fund via an ISA (Independent Savings Fund). I understand that an ISA in the UK shields you from any tax on your profits from investments (up to a limit). This fund is authorised in Ireland and regulated by the Central Bank of Ireland.

I'm confused. There is no mention of paying a US tax. As a UK citizen, would I have to pay a tax on my profits from investing in US companies? Do I have to sort this out independently with the IRS or do I sort that out with HMRC? Thanks in advance.

1 Answer 1


No, you generally pay tax on foreign investments in the country where you live, not the country where the investment is based. The companies in the S&P 500 pay US corporation tax on their profits, and that’s all that’s needed as far as the IRS is concerned, unless you are a US resident or US citizen.

  • So basically I can buy US stocks for free essentially? I thought there'd be some sort of favouritism towards US citizens?
    – Premez
    Sep 11, 2018 at 18:44
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    @Primebrook You can’t buy them for free, you still have to pay for them. But you don’t have to pay income tax or capital gains tax on them if they’re in an ISA wrapper.
    – Mike Scott
    Sep 11, 2018 at 18:46
  • Haha, yes I didn't literally mean for free. Okay thank you very much. I must say I'm surprised - I can benefit from the high growth rates of the US economy as equally as a US citizen can. Is this available to any foreigner or is there some some agreement between the UK & US governments with regard to capital gains taxes etc?
    – Premez
    Sep 11, 2018 at 18:48
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    Enlightened countries actively encourage inward investment from foreigners. When you invest in the US, that helps create American jobs, and people with jobs pay taxes. But if a country put up too many barriers, the foreign investors will just deploy their funds elsewhere, or at home (old saying: money goes where it's wanted and stays where it's well treated).
    – timday
    Sep 11, 2018 at 23:25
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    @Dilip: Agree "foreign investments" is a bit broad, but it's accurate in the context of the question which is about a UK investor investing in a UK fund which invests in the US. Whatever international tax stuff there is happens within the fund (I've no idea what the details of that are, but things can obviously be done efficiently enough that the fund can track the index accurately without some big "tax drag").
    – timday
    Sep 12, 2018 at 19:56

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