Holding High yield shares within Trading Account

[DelianLeague]

With the new dividend allowance dropping down to £500 in April 24, I have been wondering about my one and only dividend paying share that I hold in my account.

It looks like I will have to pay tax on the divis from this shareholding despite only paying £4000 for the shares two years ago! The divi paid was £650, I estimate the tax based on dividend income received this year to be in the region of £13.

What a pity that being a lower rate taxpayer on PAYE, I might have to fill in a tax return for the first time in my life for the sake of about £13.

Anyway, it is, what it is! The point of my post is to highlight that you won’t need a large holding in a high yield share to breach the allowance. It will happen to me if I continue to hold this stock. The annoying thing for me is that I tried to purchase it in my ISA and for some reason I couldn’t buy it at the time.
Regards, D.L.

[Alaric]

What a pity that being a lower rate taxpayer on PAYE, I might have to fill in a tax return for the first time in my life for the sake of about £13.

You would probably be allowed to just write a letter. They would add an estimate of the tax to your PAYE code. I wonder whether the Chamcellor and Treasury have properly thought through all the extra work created by having to chase small additional amounts of tax, How much effort will HMRC put into chasing those just over the limit who haven't bothered to report or didn't know they had to? Perhaps it might get turned on its head. A dividend withholding tax could be reintroduced, but that creates just as much work processing reclaims.


Provided you have the headroom on the annual ISA allowance, it would remain possible to sell the shares, transfer the proceeds to the ISA and repurchase in the tax shelter. That assumes it can be held in an ISA which is unusual if it cannot.

[monabri]

You could always sell sufficient to drop below the £500 level....

You have time to investigate why the platform doesn't allow the share to be held in an ISA. I've had the situation where one could buy a share in the taxable account but not the ISA, it required a phone call and this resolved the problem.

Of course, a lot can happen to a share with a yield of 16%.

[DelianLeague]

You could always sell sufficient to drop below the £500 level....

You have time to investigate why the platform doesn't allow the share to be held in an ISA. I've had the situation where one could buy a share in the taxable account but not the ISA, it required a phone call and this resolved the problem.

Of course, a lot can happen to a share with a yield of 16%.

Thanks for the Info, I wish I had known that. I should have contacted them at the time. D.L

[kempiejon]

The divi paid was £650, I estimate the tax based on dividend income received this year to be in the region of £13.

What a pity that being a lower rate taxpayer on PAYE, I might have to fill in a tax return for the first time in my life for the sake of about £13.

I've never done a tax return, a few years back, when I had an amount due, I was able to contact HMRC via an online chat and gave them the figures for my dividend income for the period, which they I assume applied to my account and there and then I paid the fee online using a debit card.
The same routine the following year though I had to wait well into the year until my estimated return for the year had been compiled, perhps a covid effect.
I wish I could give you the webchat details but about a year back I noticed they'd closed the service.
Perhaps you can find someone to answer a telephone or there's an alternative online method I couldn't locate. I hope to keep myself under the threshold for the next tax years.

[Lootman]

Do you have an ISA that you can hold this in? Seems a waste to have a taxable account for one small holding.

[DelianLeague]

Do you have an ISA that you can hold this in? Seems a waste to have a taxable account for one small holding.

As stated in my post, I did initially try to purchase it within my ISA but for some strange reason it would not let me. I think it was probably just a technical hitch on the day.

Regards, D.L.

[1nvest]

You would probably be allowed to just write a letter. They would add an estimate of the tax to your PAYE code.

IME if you phone in you'll typically have to wait 40 minutes, perhaps only to have the line dropped and having to phone in again and wait another 40 minutes before actually getting to speak to someone. For the elderly with fixed lines paying per minute as that's the only phone they've always had that can mount up in cost. Typically the person you do get to speak to isn't cheerful, rather more bland, following a flow-chart type automaton. As part of the waiting time they do repeatedly play a message saying that abuse will not be tolerated as I guess by the time people do get through and the attitude of the automaton is enough to trip some over into being angry/abusive.

As for writing in, I'm still waiting for a reply after months, and apparently that is common. Seemingly a age discrimination thing, if you phone in on a land line and/or have to write in, then you're more likely old and treated with disrespect. I'm caught up in that in having had to write in, given no other choice.

Self Assessment in contrast is relatively straight forward, quicker and simpler, especially if done online, along with a quick response as to how much you need to pay. Payments I've made have also been quick and easy, automated phone in and read off your card number and amount etc. and ... done. A few minutes type task.

Can't help with reporting dividends/taxation, as I avoid such. Instead preferring taking my own 'dividends' out of capital gains that I can offset with capital losses.

[stevensfo]

With the new dividend allowance dropping down to £500 in April 24, I have been wondering about my one and only dividend paying share that I hold in my account.

It looks like I will have to pay tax on the divis from this shareholding despite only paying £4000 for the shares two years ago! The divi paid was £650, I estimate the tax based on dividend income received this year to be in the region of £13.

What a pity that being a lower rate taxpayer on PAYE, I might have to fill in a tax return for the first time in my life for the sake of about £13.

Anyway, it is, what it is! The point of my post is to highlight that you won’t need a large holding in a high yield share to breach the allowance. It will happen to me if I continue to hold this stock. The annoying thing for me is that I tried to purchase it in my ISA and for some reason I couldn’t buy it at the time.
Regards, D.L.

I discovered the HYP approach via TMF about 1998,opened a Halifax Sharebuilder account and dutifully started investing as a way to supplement my future pension. That was over 25 years ago. Then I found out about ss ISAs and now have two of them.

The news about changes in the taxation of dividends was like a cold shower. I'm now 50% of the way through the process of selling the highest % dividend holdings in Halifax, transferring them to an ssISA and replacing them with growth shares that have zero or close to zero divis. We're not talking large sums here, but over 25 years, the divis have mounted up considerably and I'm amazed at how easy it is to breach the limits.

I'm not sure why the limits are being lowered so much, but I suspect that the government has a 'cunning plan'.

Steve

[MrFoolish]

You could wait til the next budget before stressing about it. There's a general election not far off don't ya know.

[Dod101]

If it has not been raised before, that seems a remarkable yield. Paid for £4000 for a shareholding 30 months ago and has annual dividends of £650 now!

Dood

[monabri]

If it has not been raised before, that seems a remarkable yield. Paid for £4000 for a shareholding 30 months ago and has annual dividends of £650 now!

Dood

I wonder if this is Diversified Energy Company ( DEC)?

https://www.dividenddata.co.uk/dividend ... y?epic=DEC

I will make no comment here other than "is that thunder or perhaps the sound of a bargepole being sharpened in the Midlands?"

viewtopic.php?p=592240#p592240

[kempiejon]

If it's Diversified Energy then DEC has been on a double digit yield for nearly 5 years and has increased it's dividend by 20% annualised during that period.

[SPURLEY]

Stevensfo , why are you selling your high yielding shares and buying low yielders/ growth ? . There is no dividend tax to pay on dividends in ss ISA as far as I know . I have over the last 6 months bed and isa `d all my certificated shares into my Iweb stocks and shares ISA . I have done this for the same reason as you , but re bought the same high dividend paying shares . Is there something I don`t know about ??

[SPURLEY]

Stevensfo I am sorry I have just re read your post . My mistake .

[monabri]

If it's Diversified Energy then DEC has been on a double digit yield for nearly 5 years and has increased it's dividend by 20% annualised during that period.

Source https://www.dividenddata.co.uk/dividend ... y?epic=DEC



Yields started off at a more nominal level but then increased dramatically over the last decade.

Source https://www.hl.co.uk/funds/fund-discoun ... ion/charts



Absent the current dividend, the TR graph would not be so attractive.

I'd be concerned by the debt to equity! The screening toolbelow ( SwS) also indicates a recent share dilution (14% more shares)....referred to but not shown here in the figure.

Source https://simplywall.st/stocks/gb/energy/ ... res/health


Then the concern over the way they manage the old oil wells (environmental) and account for their value must surely be a risk? There's an overview of the company in the Wiki link. I thought oil companies were awash with money at the moment...?

https://en.wikipedia.org/wiki/Diversified_Energy