88V8 wrote:You mean if the divi tax has been underdeducted by >£1,000 ?
How could it be??? Income Tax isn't even supposed to be deducted from dividends (*), so underdeducting it would involve deducting less than nothing from them!
I say "Income Tax" because the so-called "dividend tax" is just the Income Tax due on dividend income, not something new. All that was changed is the way that Income Tax is calculated: before the change, the amount that needed paying always worked out as zero for basic-rate taxpayers; afterwards, it works out as a non-zero amount for some basic-rate taxpayers. The point of which is that neither it nor payments on account are anything new - higher-rate taxpayers have faced them for years, as have some basic-rate taxpayers with other types of income. The changes have altered which taxpayers they end up affecting, so Income Tax on dividends and payments on account are new to some taxpayers - but they're not actually new.
(*) Note that PIDs paid by REITs are Property Income Distributions, not Property Income Dividends. So while 20% tax is deducted from them, it's tax on property income, not dividend income.
88V8 wrote:... Blowed if I'm going to give the Govt an interest-free loan.
You're probably not being asked to. Rather, if you asked to make a payment on account, usually that's basically the Government saying "Blowed if we're going to give 88V8 such a generous interest-free loan"!
Why? Because Income Tax is in principle assessed on income as it arises - and in the common case of salaried employees being paid under PAYE, that's basically when it's taken. The tax system doesn't try to collect all Income Tax that is due in principle that quickly for practical reasons, and so you're left owing the taxman the tax due on a dividend from the time the dividend is paid to the time the tax becomes legally due to be paid. E.g. if you were paid a dividend on April 6th this year, you're basically being given an interest-free loan of whatever tax is due on it from then until January 31st, 2019.
The payments-on-account system says that if too big an interest-free loan is given that way, repaying that loan will be brought forward - half of it needs paying by January 31st, 2018 and the other half by July 31st, 2018. That's still an interest-free loan of half of the tax due for a bit under 10 months and of the other half for a bit under 16 months, averaging somewhat over a year.
The same dates apply to a dividend paid on April 5th, 2018, and in that case the effective situation if you have to make a payment on account is that you give the Government an interest-free loan of half the tax for a bit over two months and then the Government gives you an interest-free loan of the other half for a bit under four months. Still in your favour overall, though only marginally.
There is the awkward aspect that the payments on account for a year are calculated on the basis of the tax due on income received in the previous year, essentially on the basis that income will probably remain much the same or go up a bit between years. If it in fact drops, the payments on account will probably end up greater than the tax actually due, and the taxpayer does end up effectively making an interest-free loan to the Government of half the excess for 12 months and the other half for 6 months. If the income only drops a reasonably modest amount, the overall 'interest-free loan' situation is probably still in the taxpayer's favour. If it drops a massive amount, the taxpayer can probably see the drop coming, in which case they can apply to reduce the payments on account. (My impression is that such applications are routinely granted: taxpayers are discouraged from reducing them too far by the interest and penalties that become payable on the underpayment if they reduce the payments on account below the tax that actually turns out to be payable for the year.)
I'm
not a fan of the payments-on-account system, but it reduces effective interest-free loans from the Government to the taxpayer far more often than it creates them from the taxpayer to the Government. The real problems with it are IMHO the sudden jumps in tax payments due when someone moves from not having to make payments on account to having to make them, and the trouble taxpayers whose income varies in a hard-to-foresee-much-in-advance way will have deciding when to apply to reduce them and by how much.
Gengulphus