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Where Taxpayers and Advisers Meet

Income tax on dividends

HarryStyles
Posts: 5
Joined: Tue Oct 13, 2020 1:27 pm

Income tax on dividends

Postby HarryStyles » Fri Oct 16, 2020 10:23 am

Hi all,

One more question from me. If you have a 'General Investment Account' but receive dividends of circa £500 per annum, do these have to be reported on a tax return? I was under the impression that they do not need to be declared as its under £2,000. These dividends are also accumulated too within the fund that I have.

Thank in advance!

darthblingbling
Posts: 372
Joined: Wed Aug 02, 2017 9:09 pm

Re: Income tax on dividends

Postby darthblingbling » Fri Oct 16, 2020 11:55 am

If you're required to file a return then yes it should be declared.

Otherwise, having dividends under the allowance limit is not reason itself to file a return.

To note, the allowance isn't tax free, it's a 0% band and may affect the overall calculation.

Ray Coman
Posts: 24
Joined: Tue Oct 13, 2009 10:41 am
Location: The Gallery, 14 Upland Road, London, SE22 9EE
Contact:

Re: Income tax on dividends

Postby Ray Coman » Fri Oct 16, 2020 2:54 pm

My opinion is that if the dividends are not taxable (because your total dividends are less than the dividend allowance) there is no need to include these on a UK Tax Return.
Raphael Coman, ACCA, CTA
Tax Accountant

robbob
Posts: 2982
Joined: Wed Aug 06, 2008 4:01 pm

Re: Income tax on dividends

Postby robbob » Fri Oct 16, 2020 4:29 pm

Ray
My opinion is that if the dividends are not taxable (because your total dividends are less than the dividend allowance) there is no need to include these on a UK Tax Return.
Ray if you check the notes to the tax return it is explicitly confirmed that these dividends need to be included on the return , not doing so will result in a wrong calculation for individuals in certain income brackets (eg taxable income 100k-125k or taxable income 50k-60k
aligned with child benefit tax charge box being ticked)


https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874084/SA150_English_Notes.pdf
Include all of your dividend income, even if it’s less than £2,000, as it will count towards your basic or higher rate bands and may affect the rate of tax that you pay on dividends received in excess of the £2,000 allowance.

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: Income tax on dividends

Postby maths » Sat Oct 17, 2020 12:14 am

Referring to the dividend "allowance" is misleading and often leads to erroneous conclusions. It is not an allowance and never was.

The legislation does not refer to a "dividend allowance" but a "dividend nil rate" [ITA 2007 s 8(A1)] (0%) which is levied on up to £2,000 [ITA 2007 s13A(2) Rile 1A].

Perhaps HMRC see use of the term "allowance" as suggesting something more valuable and catchy then using the proper terminology.

Bit like we are "customers" of HMRC not "taxpayers".

Samson22
Posts: 36
Joined: Mon Aug 17, 2020 10:54 am

Re: Income tax on dividends

Postby Samson22 » Sat Oct 17, 2020 4:00 am

I may be wrong but I think using the term customers is very new indeed. I don't even remember it being used 5 years ago.

Lambs
Posts: 1476
Joined: Wed Aug 06, 2008 3:15 pm

Re: Income tax on dividends

Postby Lambs » Sat Oct 17, 2020 3:15 pm

M, as usual, has the right of it. It's bloody annoying, and why I insist on referring to it (them) as the Dividend "Allowance" or the Savings "Allowance". They are not "Allowances". They never were. They do not reduce taxable income, but merely add a nil% rate.

"Customers" has been around in HMRC lingo for many years. It's bloody annoying, which is why I insist on referring to the unfortunate ones as taxpayers, rather than "customers".

There is another aspect to "customers" though, which is that as 'old' tax advisers we consider non-taxpayers to be invisible to HMRC - beyond its purview. But thanks to ever-encroaching IT, HMRC wants to know about you even if you are not a taxpayer. Whether or not you actually have tax to pay is of increasingly limited relevance.

Regards all,

Lambs

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: Income tax on dividends

Postby maths » Sat Oct 17, 2020 3:48 pm

Couldn't agree more with Lambs, as always.

bd6759
Posts: 3297
Joined: Sat Feb 01, 2014 3:26 pm

Re: Income tax on dividends

Postby bd6759 » Sat Oct 17, 2020 6:24 pm

The Inland Revenue started using the term customer years ago. It probably started in the 1990’s.

In the 2000’s it started paying out the social benefits misnamed as tax credits. The recipients were not necessarily tax payers.

The merger with C&E brought in a more diverse range of interactions with people who were not tax payers.

Customer might not be right, but neither might taxpayer.


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