Are dividends factored into daily price developments?

I started investing half a year ago by buying funds – both index funds and themed, active funds. I've always gone for the accumulating variety. My question is whether a dividend payment is already factored into the daily price developments or whether a dividend might be paid out as an extra. I recently received a message via my online brokerage about a dividend payment relating to one fund, containing some cryptic numbers (most of which were amounts of £0), and for some select holdings, my broker gives me the option to reinvest dividends automatically, although these funds are accumulating funds as well. However, for all other funds, I've never noticed any extra payment.

I suspect that what is going in is all about tax and the fact that there is no such thing as a free lunch! As you know, accumulation funds take any dividends which are paid out, and aggregate all these dividends into buying extra units in your fund. So you are continually reinvesting in the fund.

Income that is reinvested in more accumulation units in the fund is called a ‘notional distribution’ and is taxed in the same way as income would be from income units. Because it is taxed as income, it is not liable for Capital Gains Tax (CGT) and so the fund manager needs to account for this, so when you sell the fund, they can adjust things to work out your capital gain.

None of this matters if you are investing inside the tax-efficient ISA or pension wrappers. But if it’s held in a General Investment Account (GIA), it is relevant. If you invest via a platform, this is all taken care of in your annual tax certificate and explains why you see all these complex line accounting items – which you are generally free to ignore and just leave.

The accumulation share class will have a higher price than the income share class to reflect the fact that dividends have been reinvested.

If you are in accumulation units, you shouldn’t have to do anything further about reinvesting dividends, so I suspect the cryptic numbers are just accounting records for tax purposes.