Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

How to allocate dividends to the correct tax year ?

Practical Issues
minnow
Posts: 32
Joined: February 20th, 2022, 3:21 pm
Has thanked: 40 times
Been thanked: 7 times

How to allocate dividends to the correct tax year ?

#523570

Postby minnow » August 18th, 2022, 7:08 pm

Hi all --

Hopefully a quick one. Imagine I hold shares in MegaCorp Ltd. and they've declared a dividend. The ex-divi date is set to March 15th 2022 while the payment date is 1st May 2022. Would I record the dividend on my 2021-2022 tax return, or 2022-2023 ?

I'm reasonably sure that the payment date is the one that the taxman is interested in, hence the correct answer is 2022-2023. Can someone knowledgeable confirm this, please ?

thanks !

monabri
Lemon Half
Posts: 8396
Joined: January 7th, 2017, 9:56 am
Has thanked: 1539 times
Been thanked: 3428 times

Re: How to allocate dividends to the correct tax year ?

#523578

Postby monabri » August 18th, 2022, 7:25 pm

When it is actually paid (2022-23 in your example ).

Just because a dividend is XD, it is not necessarily going to be paid and can be cancelled ( especially interim dividends). Hence, it is it not received until it actually arrives in your account on the official 'pay day '.

Dod101
The full Lemon
Posts: 16629
Joined: October 10th, 2017, 11:33 am
Has thanked: 4343 times
Been thanked: 7534 times

Re: How to allocate dividends to the correct tax year ?

#523582

Postby Dod101 » August 18th, 2022, 7:43 pm

minnow wrote:Hi all --

Hopefully a quick one. Imagine I hold shares in MegaCorp Ltd. and they've declared a dividend. The ex-divi date is set to March 15th 2022 while the payment date is 1st May 2022. Would I record the dividend on my 2021-2022 tax return, or 2022-2023 ?

I'm reasonably sure that the payment date is the one that the taxman is interested in, hence the correct answer is 2022-2023. Can someone knowledgeable confirm this, please ?

thanks !


I would record it in your return for 2022/23. It is I think when it is actually received that matters. Certainly an interim dividend can be cancelled as I think monabri and I know from HSBC in 2020/21. A Final Dividend has to be passed by the shareholders in a General Meeting and cannot be cancelled as far as I know, or at least becomes a legal obligation to the shareholders.

I am therefore agreeing with monabri.

Dod

Lootman
The full Lemon
Posts: 18681
Joined: November 4th, 2016, 3:58 pm
Has thanked: 628 times
Been thanked: 6564 times

Re: How to allocate dividends to the correct tax year ?

#523583

Postby Lootman » August 18th, 2022, 7:46 pm

Dod101 wrote:I would record it in your return for 2022/23. It is I think when it is actually received that matters.

I agree. But some forms of income are treated differently, i.e. on an accrual basis rather than a received basis. Rent from BTLs being the example that comes to mind. So it is worth asking the question.

The simplest approach is to wait until you get the consolidated tax certificate, and then complete your tax return based on what that says. In fact I just hand my CTCs to my accountant and he does the rest.

minnow
Posts: 32
Joined: February 20th, 2022, 3:21 pm
Has thanked: 40 times
Been thanked: 7 times

Re: How to allocate dividends to the correct tax year ?

#523607

Postby minnow » August 18th, 2022, 9:46 pm

Super, thank you all

BobGe
Lemon Slice
Posts: 550
Joined: November 5th, 2016, 12:49 am
Has thanked: 177 times
Been thanked: 125 times

Re: How to allocate dividends to the correct tax year ?

#526913

Postby BobGe » September 1st, 2022, 9:49 pm

Lootman wrote:The simplest approach is to wait until you get the consolidated tax certificate, and then complete your tax return based on what that says.

I have on rare occasions seen cases where the 'received' date on the consolidated tax certificate is actually before the due payment date and has the resulting effect of shifting a dividend position from the expected tax year to another.

Lootman
The full Lemon
Posts: 18681
Joined: November 4th, 2016, 3:58 pm
Has thanked: 628 times
Been thanked: 6564 times

Re: How to allocate dividends to the correct tax year ?

#526929

Postby Lootman » September 1st, 2022, 11:39 pm

BobGe wrote:
Lootman wrote:The simplest approach is to wait until you get the consolidated tax certificate, and then complete your tax return based on what that says.

I have on rare occasions seen cases where the 'received' date on the consolidated tax certificate is actually before the due payment date and has the resulting effect of shifting a dividend position from the expected tax year to another.

I can see how that might happen. But would it really cause a problem?

If the taxman decides that he is interested in you for the declarations you made for dividend income, the first thing he is likely to do is compare your declared dividends with those from your broker's CTC. If they match up then chances are that will be the end of it, even if technically a dividend was shifted into a different tax year, which ultimately will have a trivial effect on the tax due.

So even if both are wrong and the taxman notices and cares, you will be able to say that you acted in good faith and that the broker made a mistake. I cannot see a situation where much harm will arise.

bluedonkey
Lemon Quarter
Posts: 1791
Joined: November 13th, 2016, 3:41 pm
Has thanked: 1395 times
Been thanked: 652 times

Re: How to allocate dividends to the correct tax year ?

#526946

Postby bluedonkey » September 2nd, 2022, 7:23 am

Payment date, definitely.

scrumpyjack
Lemon Quarter
Posts: 4816
Joined: November 4th, 2016, 10:15 am
Has thanked: 606 times
Been thanked: 2676 times

Re: How to allocate dividends to the correct tax year ?

#526947

Postby scrumpyjack » September 2nd, 2022, 7:42 am

It is the date the company paid it even if it only arrives in your brokers account later

SalvorHardin
Lemon Quarter
Posts: 2049
Joined: November 4th, 2016, 10:32 am
Has thanked: 5300 times
Been thanked: 2465 times

Re: How to allocate dividends to the correct tax year ?

#526958

Postby SalvorHardin » September 2nd, 2022, 8:54 am

Use the payment date.

Caledonia Investments in 2016 changed a dividend payment date to avoid the introduction of the dividend tax, which was to start from 6th April 2016. Normally Caledonia would have paid a dividend in August 2016, but Caledonia brought forward this dividend payment date to 1st April 2016 to avoid the dividend tax. They were quite open about the reason for doing so:

"The Board of Caledonia Investments plc announces a second interim dividend of 38.3p per share for the year ending 31 March 2016. This is intended to replace the final dividend that would normally be paid in August in the light of the changes to the personal taxation of dividend income which take effect for the next tax year."

https://www.investegate.co.uk/caledonia-inv-plc/rns/dividend-declaration/201602240700138856P/

helfordpirate
2 Lemon pips
Posts: 112
Joined: November 7th, 2016, 12:03 pm
Been thanked: 37 times

Re: How to allocate dividends to the correct tax year ?

#527109

Postby helfordpirate » September 2nd, 2022, 3:01 pm

More accurately it is when it is "due and payable" as defined by Company Law.

The HMRC manual explains it here https://www.gov.uk/hmrc-internal-manual ... l/saim5040

Simply, for interim dividends it is the date it becomes payable (as it can be rescinded before that).
For final dividends, where the company has set a payable date, it is that date; if there is no payable date, it is the date of declaration of the dividend apparently.

Note that it is not necessarily the date you receive it.


Return to “Taxes (Practical)”

Who is online

Users browsing this forum: ekipazh and 8 guests