This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Disclaiming the Dividend Allowance and the Personal Savings Allowance

adamh
Posts:34
Joined:Thu Aug 16, 2012 1:45 am
Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby adamh » Wed Sep 18, 2019 7:15 pm

I am trying to maximise my income tax bill for 2017/2018 in order to make as many EIS claims as possible (to benefit from potential CGT disposal relief).

One way to increase the bill is to disclaim the Personal Allowance, which HMRC does accept. However, I would also like to disclaim the Dividend Allowance and the Personal Savings Allowance. The HMRC advisers on the phone don’t seem to know about that. Do you think it may be possible?

Thanks
Adam

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby robbob » Thu Sep 19, 2019 8:33 am

One way to increase the bill is to disclaim the Personal Allowance, which HMRC does accept. However, I would also like to disclaim the Dividend Allowance and the Personal Savings Allowance. The HMRC advisers on the phone don’t seem to know about that. Do you think it may be possible?
I have never heard the claim disclaim personal allowance before - if you post more specific numbers we will be able to comment

I can confirm you can generally choose what income you use your personal allowance against ~(other than capital gains) - although this may have unintended adverse consequences elsewhere albeit eventually (not always at time of submission) hmrc computers should always revert to the lowest tax outcome

I can also confirm that the tax calculators used don't always get things right so there is always the issue where the official hmrc calcs can be wrong - there is a list of known issues in that regard.
If you have doubts right to them with your calc and ask them to check against online exclusions and explain why you are wrong.

Note capital gains can't use your personal allowance - so you can't ignore personal allowance for your calc ignoring capital gains then get capital gains exemption and personal allowance to use against your capital gain

adamh
Posts:34
Joined:Thu Aug 16, 2012 1:45 am

Re: Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby adamh » Thu Sep 19, 2019 9:06 pm

Thanks for your reply.

Disclaiming the Personal Allowance is known as Exclusion 100. After doing so the first pound of earned income is charged at 20% tax. Yes, it must be done in writing, not online.

I also want to disclaim the Dividend Allowance and the Personal Savings Allowance to avoid those 0% tax bands. Does anyone know if that is possible? Or can I just do the calculation without using those allowances?

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby robbob » Fri Sep 20, 2019 9:29 am

Disclaiming the Personal Allowance is known as Exclusion 100. After doing so the first pound of earned income is charged at 20% tax. Yes, it must be done in writing, not online.
I also want to disclaim the Dividend Allowance and the Personal Savings Allowance to avoid those 0% tax bands. Does anyone know if that is possible? Or can I just do the calculation without using those allowances?
Wow top banana stuff - didn't even know that disclaiming the personal allowance existed - you are so rare that hmrc count the number of bods meeting this exclusions and it can possibly be counted on one hand as their guidance advised they only knew of 4 cases - so you may be number 5 unless there has been a flood of recent claims.

Unfortunately i don't know the answer to your specific question - i have searched the online exclusion booklet and "disclaim" only shows up once which is number 100 as you mentioned.
I guess a written direct question to hmrc may be your best bet if the helpline can't find the right team/individual to answer your question.

Hopefully one of the more knowledgeable posters here might quote chapter and verse on the legislation and solve this puzzle - i can't even see an obvious answer on google.

Note looking at the principles involved i think hmrc originally wrongly advised in writing that you couldn't even disallow the perosnal allowance until they were pointed to the specific wording in the legislation that gave the relevant leeway in that regard - so in hindsight i would perhaps not totally rely on a written answer from hmrc being automatically correct.

Hey ho - thanks for teaching me something i didn't know existed

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby maths » Fri Sep 20, 2019 5:46 pm

Not really my scene but there is a difference between Personal Allowances and Dividend/Personal savings allowances.

It is correct that the former may be disclaimed; if not disclaimed it is deducted in Step 3 [ITA 2007 s.23].

However, neither the DA/PSA are "allowances" in the same manner as the PA and are not deductible at Step 3 or anywhere else in the tax computation. They are simply amounts taxable at 0%.

I do not therefore believe that waiving the DA/PSA is possible.

I await to be corrected by those in the know !!

adamh
Posts:34
Joined:Thu Aug 16, 2012 1:45 am

Re: Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby adamh » Fri Sep 20, 2019 6:42 pm

Thanks Robob. Sound advice.

Thanks also Maths. Yes, I note that the DA and PSA are in fact nil-rate bands. For the PSA (in particular) I wonder if one is able to just ignore it and allocate straight to the main income bands.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby maths » Fri Sep 20, 2019 9:20 pm

I don't believe so.

Perhaps others have a different interpretation.

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Disclaiming the Dividend Allowance and the Personal Savings Allowance

Postby Lambs » Mon Oct 07, 2019 9:34 am

Dear All,

For my two pennies', it is difficult to see how they might. To my understanding, the legislation does not afford the taxpayer the luxury of choosing the rates applicable to particular categories of income once it has arisen - beyond choosing beforehand which incomes are met by the Personal Allowance and/or certain losses. If we were able to choose the rates of tax applicable, then 40%, 45%, etc., might fall sharply out of favour.

Had our beloved Gideon been anything other than his uber political self, and been more forthright in his description of these nil rate bands, then I reckon far fewer people might be confused. It is no coincidence that, even now - years after their introduction - HMRC itself struggles with its application of these so-called "allowances".

With regards,

Lambs


Return to “Income Tax”

cron