Glossary · UK
What is Accumulation Units?
A class of fund units where income such as dividends and interest is reinvested automatically rather than paid out to the investor.
Full Definition
Accumulation units are a share class of a unit trust or OEIC in which any income the fund generates - dividends, interest or rental distributions - is reinvested back into the fund instead of being paid to you in cash. This boosts the unit price and harnesses compounding, making them popular for long-term growth where you do not need an income stream. The alternative, income units, pay distributions out as cash. For UK tax, the reinvested income is still taxable even though you never receive it: it counts towards your dividend allowance (GBP 500 for 2026/27) or savings income, and is reported as a 'notional distribution'. You should also track 'equalisation' payments, which are a return of capital and reduce your acquisition cost. When you sell, the reinvested income increases your base cost, which matters for capital gains tax (annual exempt amount GBP 3,000). Holding such funds inside an ISA or pension removes these reporting headaches entirely.