Guide to Unit Trusts

A unit trust is a collective investment which may invest in one or more of a range of assets, for example equities, fixed interest securities or cash. Because money from lots of investors is pooled together, the unit trust can buy shares in a range of different companies listed on the stock market, or a range of other securities rather than investing in just a few.

An ISA is a wrapper to allow the unit trust to be tax efficient. Once you have used up your ISA allowance, unit trusts are a good way to invest additional funds and should be viewed as medium to long-term investments of at least five years.

Please remember that the value of your investment and the level of any income received from it can fall as well as rise, is not guaranteed and you may not get back the full amount of your original investment.

To invest in a unit trust you must be aged 18 or over. You can hold a unit trust jointly.

There are no investment limits with our unit trusts. You can invest up to £50,000 online. It is important to note that unit trusts are not tax free.

There is no limit to the number of unit trusts you can invest in.

There are a number of ways you can apply for a Legal & General unit trust:

• Apply online
• Apply by phone

You may also wish to request a pack and submit an application via post.

There is no minimum holding period for Legal & General unit trusts and you can sell them at any time. However, our unit trusts are designed as medium to long term investments and we advise you keep them for at least five years.

To find out if withdrawal fees apply to your unit trust(s), refer to your original Key Information document or call our Customer Services Centre on 0870 050 0955 between 9.00am and 5.00pm Monday to Friday. We may record and monitor calls. Call charges will vary.

Our range of unit trusts include:

1. Index-tracking unit trusts - sometimes called 'tracker' unit trusts, these aim to produce a return in line with a market or sector, for example, Europe or technology.
2. Income unit trusts - are effectively designed to provide investors with a regular income.
3. Actively managed unit trusts - where you invest your money in a portfolio of assets selected by a professional fund manager (an actively managed fund).
4. Ethical unit trust - a way to invest only in UK companies that do business in a socially responsible way.
5. Cash unit trust - aimed to provide the potential for higher returns on your cash deposits than are available on the high street, without exposing you to the risks of the stock market.

You can withdrawal money from your unit trust(s) at any time. With some Legal & General unit trusts, you may incur a withdrawal fee. To find out if withdrawal fees apply to your unit trust(s), refer to your original Key Information document or call our Customer Services Centre on 0870 050 0955 between 9.00am and 5.00pm Monday to Friday. We may record and monitor calls. Call charges will vary.

'Distribution Units/Shares' allow for the net income earned to be passed onto the holders by means of periodic income payments. Sometimes known as income units/shares. Periodic income payments can be paid out by BACS only.

'Accumulation Units/Shares' allow for the net income earned to be retained in the unit/share value. The income of the unit/share is shown as an increase in the unit/share price.

UK tax will be paid as follows:

• Under current UK tax legislation there is no UK Corporation Tax payable on the capital gains realised from the disposal of assets held within the trust. However, any income other than UK dividend income which is generated within the trust is liable to UK Corporation Tax.
• Interest distributions (paid by trusts investing mainly in fixed interest securities and/or short term deposits) are generally paid after the deduction of Income Tax currently at 20%.
• All dividend distributions (paid by trusts investing mainly in shares and/or property) are deemed to have been paid after the deduction of the notional tax credit currently at 10%.
• Some trusts may suffer overseas tax which they may be unable to reclaim from the overseas tax authorities. In addition to the tax on the trust, there are also personal tax implications you need to be aware of, as follows:
• Interest distributions (as detailed above).
  • Basic rate taxpayers will have no further Income Tax liability.
  • Higher rate taxpayers will be subject to additional Income Tax at a current rate of 20% of the gross interest distribution.
  • Investors who are not liable to Income Tax and lower rate taxpayers can reclaim excess Income Tax deducted from HM Revenue & Customs.
  • Individuals who are not ordinarily resident (NOR) in the UK may be eligible to receive interest distributions without the deduction of UK Income Tax, provided that they have completed a valid NOR declaration, available from HM Revenue & Customs.
• Dividend distributions (as detailed above).
  • Basic rate and lower rate taxpayers are only liable for tax at 10% on the dividends they receive which is met by the 10% tax credit. There will be no further Income Tax liability.
  • Higher rate taxpayers will have further Income Tax to pay at a current rate of 25% of the net dividend distribution received.
  • Investors who are not liable to tax cannot reclaim the tax credit.
  • Individuals who are not ordinarily resident (NOR) in the UK may be eligible to receive interest distributions without the deduction of UK Income Tax, provided that they have completed a valid NOR declaration, available from HM Revenue & Customs.

• Capital Gains Tax

  You may be liable to Capital Gains Tax on withdrawals from your unit trust. To find out if withdrawal fees apply to you, refer to your original Key Information document or call our Customer Services Centre on 0870 050 0955 between 9.00am and 5.00pm Monday to Friday. We may record and monitor calls. Call charges will vary.

• Stamp Duty Reserve Tax

  All unit trusts that invest in UK shares have to pay Stamp Duty Reserve Tax each month. The amount of duty paid is the duty due on any units the unit trust manager buys back from one investor and sells on to another. Legal & General pays this duty out of the assets of the fund. The amount of duty is reduced by the proportion of the fund not invested in UK shares, including any uninvested cash.

• Investors who pay tax abroad.

  Depending on your residency status you may be liable to pay tax in a country outside the UK. If so, you may be liable to tax on any income or capital gains.

  (Tax assumptions are those currently applicable and are subject to statutory change. The value of tax advantages will depend on your individual circumstances and where the capital is invested. If you are unsure of your personal tax circumstances, please contact our Customer Services Centre on 0870 050 0955 between 9.00am and 5.00pm Monday to Friday. We may record and monitor calls. Call charges will vary).