Do you need a tax return?

July 11, 2017

Do you know dividends are taxed differently from 6th April 2016? The UK has a complex tax system and changes to the taxation of dividends means that many people will need a tax return for the first time after April 2017.


What are the changes in interest?

  • Tax will no longer be deducted at source.
  • New savings allowance of £1,000 for basic rate tax payers, £500 for higher rate tax payer but no allowance available for additional rate tax payers.
  • Starting rate for savings remains at £5,000 but is only available where your non savings income is below £16,000.

What are the changes in dividends?

  • No tax credit.
  • New £5,000 allowance for all tax payers regardless of the level of your income.
  • New rates are 7.5%, 32.5% and 38.1%.

How will these changes affect you?

  • If your total dividend income is below the £5,000 allowance up to 6 April 2018, there will be no tax due on your dividend income regardless of the level of your other income.
  • If your dividends exceed £5,000 and your total income exceeds the personal allowance of £11,000 it is likely you will pay more tax under the new rules that you would have previously.
  • For basic rate tax payers – where income was covered by the personal allowance and dividend tax credit there was no requirement to submit a tax return. If there is tax now due on your dividend income you may need to complete a tax return – if you are unsure, please get in touch.

 

For an example of how this works see below:

 

2015/16 2016/17
 

Income

Salary/pension 10,000 10,000
Dividend 30,000 30,000

40,000


40,000

 

Personal allowance

 

(10,600)

 

(11,000)

Dividend allowance (5,000)
 

Taxable income


29,400


24,000

Tax due 2,940 1,800
Less tax credit (3,000) 0
 

Tax due


Nil


1,800

 


Help with the transition

If you require a tax return for the first time, we will complete and submit your tax return for the year ended 5 April 2017 and give you confirmation of tax payable by 31 January 2018.

We currently have a special offer price of £250 +VAT but the deadline for this offer is 31 October 2017, so make sure you don’t miss out and get in touch with our team today!

 

Barbara McQuillan – Partner

Email: barbara.mcquillan@hlca.co.uk or tel: 0131 226 0200

 

Lucy Crow – Manager

Email: lucy.crow@hlca.co.uk or tel: 0131 226 0200