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Tax Systems LSE:TAX London Ordinary Share GB00BDHLGB97 ORD 1P
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General Retailers 15.11 -1.88 -0.59 98
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waldron: Published in: Investing 7th September 2021 Tax on share dividends to increase by 1.25%. Here’s what it means for investors Updated: by Karl Talbot | 3 min read Tax on share dividends to increase by 1.25%. Here’s what it means for investors The government has announced a 1.25% increase in the tax on share dividends that will apply from April 2022. The news comes at the same time as it was announced that National Insurance contributions will increase by 1.25% next year. The government says the rises will help fund health and social care in England. Both announcements are subject to a vote in the House of Commons. So if you’re an investor, what does the new tax on share dividends mean for you? Here’s what you need to know. How much tax is currently paid on share dividends? If you’re an investor, you currently get a dividend allowance of £2,000. So, if you receive dividends worth £2,000 or less, you don’t have to pay any tax on them. For dividends of more than £2,000, the amount of tax you pay depends on your income tax band. This is unless your investments are held in an ISA, in which case your dividend payments remain tax free. For non-tax-efficient investments, you must pay 7.5% tax on any dividends over £2,000 if you’re a basic rate taxpayer. If you’re a higher rate taxpayer, you must pay 32.5%, and it’s 38.1% if you’re an additional rate taxpayer. You can find more information on income tax bands on the gov.uk website. What are the changes to dividends tax? From April 2022, the government is implementing a 1.25% rise in the tax on dividends to help fund social care. Analysts expect that the move will raise up to £600 million, with the majority of payers coming from the top 10% of households. The new tax will not, however, apply to investments held within an ISA. Why has dividends tax increased? With a National Insurance hike of 1.25% also announced, many analysts feel that the dividends tax is a way for the government to show that it is keen to increase taxes on asset holders as well as those who rely on a working income. Critics of the National Insurance hike have repeatedly pointed to the fact that it will not apply to most pensioners, landlords or those living off income from assets, suggesting that only those relying on a working income face the burden. National Insurance, by definition, is also a regressive tax, meaning that an increase disproportionately impacts those on lower incomes. That’s because the amount of contributions you have to make, at a percentage level, decreases at higher incomes. However, critics of the dividend tax rise consider it a token gesture. That’s because the 1.25% rise won’t apply to investments held in an ISA. How has industry reacted? Commenting on the changes, Tom Selby, head of retirement policy at AJ Bell, says that investors should now take the time to examine their portfolios in order to ensure they aren’t inadvertently paying more tax than they need to. He explains: “The increase in dividend tax means people investing outside tax-sheltered wrappers like pensions and ISAs should review their portfolios to make sure they are making as much use as possible of their annual contribution allowances to keep their tax bills as low as possible.” Will the tax increase definitely go ahead? MPs will vote on the government’s health and social care plan, including the planned dividends tax rise, on Wednesday 8 September at 7pm. While a number of cross-party MPs do not approve of the proposals, the policy is expected to pass through the House of Commons.
waldron: I live in France but my earnings arise in UK: Where to pay income tax? As France is where you reside, it is to France that you should be declaring your worldwide income and paying whatever tax is due – and the social charges – and not the UK 16 August 2021 'Double tax treaties prevent the paying of double taxes in two countries and they allocate the taxation of income to the country in which one is resident' Reader question: I live in France and am paying income tax in the UK because all my income arises there. Should I be paying in France as well, despite not having any French income? In short, no, not as well, though perhaps you should be paying it in France instead. Double tax treaties prevent the paying of double taxes in two countries.
waldron: UK TAX YEAR CHANGE 'Move the tax-year end to 31 December!' Businesses want the tax year to be brought in line with calendar year to fit with global trading partners 91% of medium firms support plans to shift tax year end to 31 December Office for Tax Simplification considering change to 31 March or 31 December Firms making business abroad to benefit particularly from the proposed change By Camilla Canocchi for Thisismoney.co.uk Published: 16:33 BST, 16 August 2021 | Updated: 16:33 BST, 16 August 2021 The vast majority of Britain's medium-sized businesses are in favour of shifting the end of the tax year to 31 December in line with its international peers, a new survey shows. In most major countries, including the US, France and Germany, the end of the tax year coincides with the end of the calendar year. Ireland also moved its government accounting and tax year end from 5 April to 31 December in 2002. Last month, the Office for Tax Simplification said it was considering moving the UK’s tax year, currently ending on 5 April, to either 31 March or 31 December. Tax year end: Most UK firms would rather it coincided with the end of the calendar year Tax year end: Most UK firms would rather it coincided with the end of the calendar year A move which would prove popular among British firms, since over 90 per cent said they would support it, according to a survey of 500 British medium-sized businesses by accounting firm BDO. However, they said the change would need to be planned carefully with longer filing deadlines to help businesses make the transition. 'Businesses are hoping that a rethink of the tax system can help them flourish following the challenges of Brexit and Covid-19,' said Paul Falvey, tax partner at BDO. 'Changing the tax year to 31 December is supported by businesses of all sizes and will be particularly helpful for those with international connections.' Share this article Share The UK’s tax year for individuals runs from 6 April to the following 5 April, and it has been like this for hundreds of years. In contrast, accounting systems used by businesses have been developed around month and quarter ends. The financial year for the UK government accounting and for companies runs from April 1 to March 31. That - and 31 December - are the two most popular dates for accounting for multinationals. In June, the OTS said that if they were to make the end of the calendar year coincide with the end of the tax year, the transitional year would be shortened by three months and five days and run from 6 April to the following 31 December. 'Clearly there will be challenges associated with implementing this change, not least for the Government itself,' Falvey said. 'But in the long term, a 31 December year-end would also make life simpler for HMRC. 'Aligning the year-end with more of the international community will help taxpayers to calculate and HMRC to check that the correct amount of tax is paid by those doing business in more than one country.' Medium sized firms would also like additional tax measures to encourage businesses to grow and scale-up in the UK, according to the survey. More than half businesses said they would like the 'super deduction' policy introduced by the Chancellor at the Budget in March - which is set to end in March 2023 - to become permanent More than half businesses said they would like the 'super deduction' policy introduced by the Chancellor at the Budget in March - which is set to end in March 2023 - to become permanent Some 53 per cent said they would like the 'super deduction' policy introduced by the Chancellor at the Budget in March - which is set to end in March 2023 - to become permanent. The super deduction allows companies to claim capital allowances at a 130 per cent rate for money spent on 'qualifying' machinery, meaning companies can cut their tax bill by up to 25p for every £1 they invest. Businesses would also like further tax incentives introduced, with half saying that the government should introduce better research and development tax breaks for all sizes of business. 'The government has introduced a huge programme of Covid-19 support measures, but as we enjoy a summer with fewer restrictions, we should consider how tax incentives can be improved to inspire UK-based businesses to grow domestically,' Falvey added. 'Making the super deduction policy permanent as well as broadening R&D tax breaks would certainly be a good start to encourage further investment and innovation.'
waldron: 75% of workers support Covid tax hike Over threequarters of UK workers are willing to pay additional income tax to fund the government’s £300bn of borrowing to fund the Covid-19 response, with many labelling the move ‘a necessary evil’, a survey by AJ Bell has found 4 Jun 2020 Pat Sweet Pat Sweet Reporter, Accountancy Daily, published by Croner-i Ltd View profile and articles. The investment platform’s poll of some 2,000 individuals saw 77% indicate their willingness to see income tax rise, with the average rise put at 3.9%, while almost a fifth indicated they would be prepared to pay an extra 5% or more in income tax. In contrast, less than a quarter (23%) said they are unwilling to accept any rise in income tax. Getting on for two thirds (63%) accepted tax rises as a ‘necessary evil’ as a result of the pandemic. Two thirds (67%) of those polled said everyone has a responsibility to contribute to the costs of government support schemes, and 70% thought the government was right to increase borrowing during the crisis. When it comes to paying more tax, measures targeting dividends and capital gains were the most popular revenue raisers, cited by 37%. Just over a fifth (22%) believe inheritance tax should be in the Chancellor’s crosshairs, while 21% backed a National Insurance increase. Changes to the pensions regime were less popular with removing the state pension triple-lock (10%) and restricting pension tax relief (9%) the least favoured options. Overall, the majority (85%) reported they would rather pay lower amounts over a longer period of time, than large amounts over a shorter period of time. Tom Selby, senior analyst at AJ Bell, said: ‘While the coalition government opted for public spending cuts to tackle the deficit after the 2008 financial crash, Prime Minister Boris Johnson is reportedly reluctant to follow a similar path. ‘ If this is the case then tax rises will likely be necessary to help balance the books – and Brits appear ready to do their bit. ‘While policymakers will need to be careful not to stifle an economic recovery by hiking income tax rates too much, there appears to be general acceptance that the Covid-19 costs will need to be repaid and that tax rises are therefore a necessary evil. ‘Indeed, this may be one of the few times in history where a government could hike income tax – perhaps via a time-limited Covid-19 surcharge – without necessarily wrecking their election chances.’
waldron: HMRC overcharges pensioners £600m in tax – are you owed a refund? by Brean Horne from Moneywise | 1st May 2020 09:56 ‘Emergency tax’ applied to pension pots by HMRC hits retirement savings HM Revenue & Customs (HMRC) has refunded more than half a billion pounds in overpaid tax to retirees since the pension freedoms were introduced in 2015, according to new data. Pension freedoms were designed to give people more flexibility to control their retirement income by allowing over-55s to withdraw money from their defined contribution pension pots when they wanted. But the taxman has overcharged pensioners by £600.4 million on these withdrawals, and has been refunding it to people who make claims. Almost £33 million was paid back to pension savers in the first three months of 2020 alone, and more than 10,000 people made an application to claim back this cash from HMRC in this period. The average sum repaid was £3,141.23. A total of 242,188 pensions tax refunds claims have been made since the pension freedoms came into effect. These figures only represent the number of people who have made claims themselves. The total number of savers overcharged is unknown. Why are pensions being overtaxed? Under the new pension freedom rules, people aged 55 and over can withdraw the first 25% of their pension tax-free. After this, income tax is applied to the remaining 75% of their pot. Unless your pension provider holds an up-to-date tax code, an ‘emergency tax code’ will be applied to your first lump sum withdrawal. An emergency tax code treats the lump sum being withdrawn as though it will continue to be paid each month. This is often referred to as a ‘Month 1’ basis. For example, if you make a £10,000 withdrawal you could end up being taxed as though your annual income is £120,000. How to claim back overtaxed pension I you think you HMRC has charged you too much pensions tax, you will need to fill out one of the following three claims forms which can be found on the government’s claim a tax refund page. P55 If you have not withdrawn your entire pension pot and are not taking out regular payments, you will need to fill out a P55 form. HMRC received 6,286 of these claims from savers in the first quarter of 2020. P53Z A P53Z form should be filled out if you have withdrawn your entire pension pot and also receive other taxable income. A total of 2,973 claims were made in the first three months of this year. P50Z If you have drawn down your entire pension pot but have no other taxable income you will need to fill out the P507 form. Only 1,138 of these were made during the first quarter of 2020. This article was originally published in our sister magazine Moneywise. Click here to subscribe. These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
la forge: 958,000 taxpayers miss self assessment deadline A record 10.4m taxpayers filed their self assessment tax returns online by the 31 January deadline, but nearly a million returns are still outstanding 3 Feb 2020 Sara White Sara White Editor, Accountancy Daily, published by Croner-i Ltd View profile and articles. For the first time a total of 11.1m taxpayers filed by the 31 January deadline, including around 700,000 who filed on paper by the earlier October 2019 deadline. HMRC said that 958,296 taxpayers missed the deadline (8.18%), up on last year’s 700,000 late returns. An estimated 11.7m 2018/19 tax returns were due by the end of January. As usual, there was a surge of last minute submissions, as thousands of taxpayers filed their tax returns in the last hour with 26,562 completing their returns from 11pm to 11:59pm on deadline day. Throughout the day over 702,000 (7%) taxpayers submitted their returns with the peak hour for filing between 4pm to 4:59pm when 56,969 filed. Online filing accounted for 10,450,542 returns were filed online (93.95% of total filed), a record figure, and up on last year’s 10.1m. Anyone who misses the deadline will be charged a penalty unless they can provide a genuine excuse, supported by evidence. HMRC has the right to reject unreasonable excuses and penalties can quickly mount up. There is an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time. Penalties escalate the later the return is. After three months, additional daily penalties of £10 per day may be charged, up to a maximum of £900; after six months, a further penalty of 5% of the tax due or £300, whichever is greater; and for those failing to make a return after 12 months, another 5% or £300 charge, whichever is greater. There are also additional penalties for paying late of 5% of the tax unpaid at 30 days, six months and 12 months. HMRC is urging anyone who missed the deadline to contact the tax office. It said that ‘the department will treat those with genuine excuses leniently, as it focuses penalties on those who persistently fail to complete their tax returns and deliberate tax evaders’. Angela MacDonald, HMRC’s director general for customer services, said: ‘The majority of customers have submitted and paid their tax returns before 31 January. While few people enjoy the process it’s good to get it out the way and know you have contributed towards our vital public services. ‘I’d like to thank everyone who filed and paid on time, but anyone yet to file or pay should contact HMRC straight away because we are here to help.’
the grumpy old men: Adam Smith Institute The Window Tax July 24, 2019 The Window Tax Madsen Pirie It was on July 24th, 1851, that the hated Window Tax was finally abolished. Introduced under King William III, it was not intended to hit poor people, and exempted cottages, but was designed to be in proportion to the wealth of the taxpayer. An income tax was thought too intrusive, because the government had no business knowing how much people earned. The Window Tax was initially levied in two parts. People had to pay 2 shillings annually (a tenth of a pound) per house if they had fewer than 10 windows, 6 shillings if they had between 10 and 20, and 10 shillings for those with more than 20 windows. In current values, 2 shillings then would be worth about £13.50 now. Of course, taxes change behaviour, and dynamic models must take this into account. The tax did not raise the hoped-for sums because many people responded to it by bricking up some of their windows in order to avoid it. Visitors to Britain stare in fascination at some of our old houses, noting that where there was clearly once a window, there are now bricks or plaster. Sometimes this can be seen in whole rows of terraced houses. New houses were built with fewer windows to avoid the tax. In Scotland a Window Tax was introduced after 1748. A house had to have at least seven windows, or a rent of at least £5 to come under the tax. When it was increased in the 1780s, some Scots opted, instead of bricking up windows, for the less costly recourse of painting them black, with a surrounding white frame. These were known as Pitt’s Pictures, after the prime minister of the day, and can still be seen in some places. The Window Tax was unpopular, because it was seen by some as a tax on "light and air." The tax was increased many times, especially during the wars with France, but it was halved by the reforming administration of 1823, and ended altogether in 1851 after popular agitation. It does provide a salutary lesson for those who would levy taxes. Increases in tobacco duty might be intended to raise money or to make people smoke fewer cigarettes, but they also encourage smuggling. Increases in alcohol duties might be for revenue or to cut alcoholism, but they also lead people to opt for cheaper booze, and in Scotland, perhaps even for opioids. Stamp duties on house purchases result in fewer transactions because people stay put in order to avoid it. This leaves the elderly staying in larger homes than they need once their children have left, leading to a market shortage of homes suitable for young and growing families. There is a point at which income tax increases produce a fall in revenue as people put in less work and use tax-shelter schemes to avoid paying them. Higher corporation taxes lead corporations to locate elsewhere, and higher capital taxes lead people to move it beyond the reach of the tax man. A ruling of the United States Supreme Court stated that "The legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted," and a judicial ruling in the UK declared almost a century ago that the law did not require a person to pay the maximum tax if they could avoid doing so. Two things in particular irritate those who would spend our money as they wish rather than as we wish. One of these is tax competition, which gives people the option of moving assets and earnings to lower tax environments. And the other is the ability of people to modify their behaviour in order to escape the incidence of taxes levied upon it. The history of the Window Tax is a good lesson.
maywillow: Https://www.taxresearch.org.uk/Blog/2018/12/13/tax-avoidance-is-not-theft/?utm_source=feedburner&;utm_medium=feed&;utm_campaign=Feed%3A+org%2FlWWh+%28Tax+Research+UK+2%29 Tax avoidance is not theft Posted on December 13 2018 I have learned that many campaigning NGOs are planning to describe tax avoidance as theft in the future. I am quite worried by this. First, let me be clear what tax avoidance is. I recently defined it as follows: Tax avoidance is taxpayer determined behaviour where the taxpayer decides to submit a tax return and declare their tax liabilities based on an interpretation of the applicable law of the jurisdiction that the taxpayer knows may be unacceptable to the tax authority of that country. They do so knowing that the risk of their potential misinterpretation of the law being discovered is limited and so the chance of appearing to reduce their liability in ways they claim to be legal, whether that is true or not, is sufficiently high for them to justify the risk of doing so. The scale of this issue is related to the complexity of the tax system and the degree of uncertainty that might exist as to the proper interpretation of the tax rules that it creates. And I also made clear what tax avoidance is not: I stress that tax avoidance does not ever include making use of tax reliefs and allowances provided by the law of a country: the cost of these is included in the tax policy gap. I defined the tax policy gap as: The tax policy gap is the tax not paid in a country as a result of the decision made by a government not to tax a potential tax base, such as wealth. Additionally it is the value of the tax reliefs, allowances and exemptions given by a government for offset against a source of income that might otherwise be taxable. So tax is not paid, but no one avoided it: the government had no intention that it should be paid. Sorry to be so laboured on this, but it’s important. And that’s for a good reason. Tax avoidance may be playing fast and loose with tax law. It is certainly about using interpretations of the law that a taxpayer knows might not be agreed by a tax authority. But let’s be clear that every morning two lawyers walk into courts all over the world and argue what the law means and fifty per cent of them usually turn out to be wrong. In that case not agreeing with a tax authority’s interpretation of tax law is not wrong. Disagreement can be honest. It can be reckless. It can even be unethical (and often is, in my opinion, when it comes to tax). But theft is something else. Theft can be defined as follows by section 1 of The Theft Act 1968: Basic definition of theft. (1)A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it; and “thief” and “steal” shall be construed accordingly. (2)It is immaterial whether the appropriation is made with a view to gain, or is made for the thief’s own benefit. Does tax avoidance dishonestly appropriate property belonging to another? I would suggest not. I would say it knowingly exploits uncertainty in the law to secure a pecuniary advantage, but that most of those doing it will have secured an opinion from a professional adviser before doing so that the action in question was legal, even if it had an uncertain consequence. And those opinions (which will not be publicly available, but which will be in the possession of the tax avoiding taxpayer) will be more than enough to show that the tax avoider had no intention of being dishonest, precisely because they had gone out of the way to make sure that they had an opinion to say they were acting legally, even if with dubious ethical intention. In that case accusing someone of theft has serious ramifications. Like libel. And I would hate to see tax campaigners being charged with that. So I strongly suggest that those tempted to use this language think again. It is most unwise.
florenceorbis: Budget 2018: Who will pay the Digital Services Tax? Rory Cellan-Jones Technology correspondent @BBCRoryCJ on Twitter 30 October 2018 Share this with Facebook Share this with Messenger Share this with Twitter Share this with Email Share Image copyright Getty Images Image caption The chancellor: searching online for revenues It was one of the more surprising features of the Budget, a Digital Services Tax designed to make tech giants earning vast revenues in the UK pay their fair share. Now comes the difficult part - working out how the tax will be designed and who will pay it. The tax looks as though it is targeted at the likes of Google, Amazon and Facebook - the Treasury says it will apply to search engines, online marketplaces and social media firms. "You can't specify the named firms so you think what characteristics catch them but not start-ups," says Jill Rutter, a former Treasury civil servant who now works for the Institute of Government. She says the chancellor will have had two worries in designing the tax - "catching things he doesn't want to catch - or not catching what he does want to catch." But tax lawyer Dan Neidle from Clifford Chance says there is a guiding principle behind the tax. "The highfalutin theory is that value is being created by users for these companies and not being taxed. So for instance, you put a picture of a cat on Facebook, people click on an advert next to it and Facebook earns money from that." Stream or download the latest Tech Tent podcast Social media firms and search engines will pay the 2% tax on the advertising revenue earned from UK users in this way. When it comes to online marketplaces, the aim is not to put a tax on the payment from the consumer but on the "platform fee", the commission paid by the merchants using the market. Firms will only pay the tax if they have global revenues of at least £500m. They have to be profitable, and the first £25m of UK revenues will be tax free. The Office for Budget Responsibility says around 30 companies could end up being affected. So let's look at who might fit into each category: Search engines: It's hard to see any business other than Google and Microsoft's Bing qualifying for the tax Social Media firms: Facebook certainly fits the bill, and don't forget it also owns Instagram which is now generating lots of advertising revenue. But what about the UK's other favourite social hangouts Twitter and Snapchat? They aren't making profits - until they do they're exempt. Online Marketplaces: Here it gets a lot more complex. Ebay certainly qualifies but tax experts are divided about Amazon, It won't pay anything on revenues earned from direct sales to shoppers but what about the commission from merchants using the Amazon Marketplace as a platform to sell their wares? Food Delivery: Then there is speculation about a couple of UK firms in the food delivery business, Deliveroo and Just Eat. Their business model - earning commission from restaurants dependent on their platform - appears to qualify but Deliveroo's revenues are below the threshold and neither company is making a profit. But that could change by 2020 when the tax comes in. Image copyright Getty Images Image caption Food delivery firms may escape the tax So for now it seems that only American tech firms could qualify. "Very few British firms are big enough - this is aimed at US giants and that brings a risk," says Heather Self at the accountants Blick Rothenberg. She warns that if the Trump administration sees this tax as effectively a tariff on successful American businesses that could end up with a complaint to the World Trade Organization. What is clear is that there is a lot of painful work ahead on a tax which, in the words of Heather Self, will raise a lot less than the chancellor earmarked for mending potholes. Jill Rutter from the Institute of Government says even the £400m projected return is "the most uncertain figure in the Budget", though she suspects Facebook is one firm that will pay up without making a fuss: "2% is a drop in the ocean for them. Nick Clegg (Facebook's new communications supremo) may advise them it's not worth the reputational risk to argue about it." If the tax was about assuaging public anger about the low tax paid by giant firms, it may not do the job - after all the world's wealthiest business, Apple, and Uber, one of the most controversial, both seem unlikely to be affected,. "The problem with sector-specific taxes is you create lots of uncertainty - and lots of work for people like me," says Dan Neidle. So at least the tax lawyers will be happy.
pvb: [N.B. No Edit] OK so possibly nobody is interested. Either because: 1. Nobody is interested 2. Everyone on ADVFN is already fully familiar with all this 3. Everyone on ADVFN already files a SA tax form 4. Or... ;-) But surely there have to be some Basic Rate Taxpayers on here who need to know and understand the new income tax system, due to come in at the start of the new Tax Year and how it could/might affect them. From 6th April this year Tax on income, such as interest payments and share dividends, is no longer handled 'automatically' for BR taxpayers and will in future be collected from you directly using the PAYE system, via adjustment to your annual Tax Code. So is your Tax Code correct? How do you know? Have you checked? Yes I know it's boring but you need to pay attention. WARNING What follows is based on my experience, is all only MY OPINION etc. and directed at BR taxpayers. I'm sure HR taxpayers can work it out for themselves and will anyway be filing a SA form (for now at least). I AM NOT ANY KIND OF TAX EXPERT. Anyways, here is a summary to date of 'what we know'. It's all about this, the governments plans for income Tax to go digital: https://www.gov.uk/government/publications/making-tax-digital This is the proper reason for the new personal £1000 tax free allowance on interest payments. Forget all that "help for hard working people" stuff, IMO it's real point is to take the majority of BR taxpayers out of personal taxation for interest - this makes the upcoming HMRC online taxation IT systems workable and also takes the political heat off the government if otherwise practically all taxpayers woke up and realised they faced a future of fiddling around with taxation and the HMRC. I assume everyone knows that, from 6th April this year, interest paid on cash accounts will be paid gross, no tax will be taken off at source. It will still be taxed (at 20% for BR taxpayers), but only above the new £1000 Personal Interest Allowance. Also, dividends will be taxed above the £5000 Dividend Allowance (at 7.5% for BR taxpayers). These taxes will in future all be paid directly by you, usually via the PAYE system. How is your Tax Code derived? Simple: Start with the Annual Personal Allowance (£11,000 - 2016/17) add on the personal Savings Allowance (£1000 - 2016/17). Total = £12,000 Then they start taking things off: Dividend Tax e.g -£225 (see below for an explanation of this figure) Interest paid gross e.g -£1500 State Pension (paid gross) e.g. -£7000 Result 12,000 - (225 + 1500 +7000) = 3275 If you are a BR taxpayer on the standard allowance then your Tax Code will be 327L. This is given to your main PAYE payer and they will take off ALL the tax due from your main PAYE income at the 20% rate (BRT taxpayers). The point of the above seems to be that effectively (assuming BRT) ALL the above can be taxed at the 20% rate (BRT on PAYE income, Savings Rate Tax on interest and also at 20% on the 'dividend income') and collected from your PAYE source - pay or pension. Hang on! Isn't dividend tax 7.5% NOT 20% (for BR taxpayers)? And what about that £5000 dividend allowance? Correct. That is why the 'dividend income' of £225 shown above is not the real taxable dividend you receive it is an adjusted amount derived from the actual figure you are expected to receive. It seems to work like this: say you are expected to receive £5600 in dividends during the tax year 2016/17 so, the adjusted figure in the Tax Code calculation is equal to 7.5/20 * (Expected Dividends - Dividend Allowance). So in this case: £5600 - £5000(div allowance) = £600 taxable dividends. Following adjustment by the ratio of the 7.5% Dividend Taxation rate and the 'normal' 20% basic rate we get: (7.5/20) * £600 = £225 And it is this 'reduced' figure that appears in the Tax Code calculation rather than the 'actual' £600 of taxable dividends above the £5000 dividend allowance, to be taxed at the 20% rate (for BR taxpayers). Neat huh? The point is, the interest and dividends used are those assumed or known to HMRC for the tax year 2016/17. IS IT CORRECT? Only you know or can estimate this in advance. But the figures shown on your recent Tax Coding Notice will be used to collect the tax from your income via PAYE in advance, not after you have received it. You need to check that it is reasonably correct or you can end up paying too much or too little tax during the year - it is no longer neccesarily 'automatic' even for BR taxpayers. At the end of the tax year any errors will need to be adjusted either by payments or adjusting the next years Tax Code. This will be done via the Online Personal Tax Account in future yeras, according to the government documentation. If incorrcet now you may get your Tax Code adjusted by filling in this form online: HTTPS://online.hmrc.gov.uk/shortforms/form/P2?dept-name=&;sub-dept-name=&location=43&origin=HTTP://www.hmrc.gov.uk I did this as my Code was too low and I have had it raised. They aim to get back to you in 15 days. It seemed painless enough You can wait for your new tax code to be posted to you or look at your Online Personal Tax Account (if you have one). You can do this after registering using your Government Gateway Account credentials (if have one) or using the newer GOV.UK Verify service, which uses approved companies (eg Post Office, Verizon) as sponsors to guarantee you are who you say you are. Here is the Government Gateway route: HTTPS://www.tax.service.gov.uk/account/sign-in?continue=/personal-account/do-uplift First time you will need to register for the Online Tax Account - You need, DOB, NI number and likely a P60 as they asked me for details as a check. You need a phone for a one time PIN number sent by SMS every time you log on. This sytem is still in public BETA but will, presumably, 'go' from 5th April.
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