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Income Tax on Dividends

Practical Issues
Joe45
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Income Tax on Dividends

#278143

Postby Joe45 » January 17th, 2020, 3:25 pm

My wife's only taxable income is dividends on investments held outside her ISA. This year her income from dividends will exceed the annual allowance of £2,000 and she will therefore be required to pay a small amount of tax, around £200.

She is not required to make a tax return and the HMRC website states that she should "tell HMRC by: contacting the helpline; asking HMRC to change your tax code - the tax will be taken from your wages or pension; or putting it on your Self Assessment tax return, if you already fill one in.

Of these, the first option is the only one viable. Even then, it's not attractive. Does anyone else do this? Can she simply send a cheque?

kempiejon
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Re: Income Tax on Dividends

#278146

Postby kempiejon » January 17th, 2020, 3:38 pm

I had unsheltered dividend income exceeding the limit for the 2018/19 tax year and do not do a tax return. I contacted HMRC via a chat dialogue box on their website, told them of the change to my tax code and about a week later they sent me a SA800 with a revised tax bill saying I owed a few hundred quid from last year. With that form and an HMRC personal tax account online I was able to pay the outstanding by debit card. There is the option to add it to your tax code, I wasn't interested in that or other payment methods so chose the online option, there might well have been other ways to pay including by cheque or at a bank but I don't have the letter to hand to check.

pochisoldi
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Re: Income Tax on Dividends

#278150

Postby pochisoldi » January 17th, 2020, 3:47 pm

Joe45 wrote:My wife's only taxable income is dividends on investments held outside her ISA. This year her income from dividends will exceed the annual allowance of £2,000 and she will therefore be required to pay a small amount of tax, around £200.

She is not required to make a tax return and the HMRC website states that she should "tell HMRC by: contacting the helpline; asking HMRC to change your tax code - the tax will be taken from your wages or pension; or putting it on your Self Assessment tax return, if you already fill one in.

Of these, the first option is the only one viable. Even then, it's not attractive. Does anyone else do this? Can she simply send a cheque?


Are you saying that your wife's only taxable income is dividends?
If this is the case then there is no tax to pay on any income upto the personal allowance, and the first £2000 above that?

Put another way, there is no need to report any dividends above £2000 which are fully covered by the personal allowance.
Any recommendation to "report dividend income above £2000 to HMRC" is based on the assumption that the personal allowance is already used up on other income (e.g. salary, pension).

PochiSoldi

nmdhqbc
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Re: Income Tax on Dividends

#278154

Postby nmdhqbc » January 17th, 2020, 3:50 pm

Joe45 wrote:My wife's only taxable income is dividends on investments held outside her ISA. This year her income from dividends will exceed the annual allowance of £2,000 and she will therefore be required to pay a small amount of tax, around £200.


If it's her only income then she should get the personal allowance as well. So another £12.5k tax free. Or by saying taxable income you may mean she has £12.5k untaxable income as well in which case ignore me.

PinkDalek
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Re: Income Tax on Dividends

#278157

Postby PinkDalek » January 17th, 2020, 3:52 pm

Joe45 wrote:[Can she simply send a cheque?


Most unlikely that would be a good idea if it doesn't meet a liability known to HMRC.

Cheques are still accepted though https://www.gov.uk/pay-self-assessment-tax-bill/by-post but that's for paying a 'Self Assessment tax bill'.

See also https://www.gov.uk/pay-self-assessment-tax-bill/through-your-tax-code. Are the Through your tax code/When you cannot pay through your tax code conditions applicable?

Particularly you already pay tax through PAYE and the negative you do not have enough PAYE income for HMRC to collect it.


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