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Dividend Tax / Self Assessment

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    Dividend Tax / Self Assessment

    I've not got much faith in my accountants after the mistakes I've seen them make.

    I'll be changing accountant after year-end, but in the meantime I wanted to check with you guys about their personal tax calc.

    They say that dividends and salary can be taxed it whichever order you wish i.e. its up to you which one uses up each of the tax allowances/bands and this allows you to arrange things in the most tax efficient order.

    Whereas the 2 online calculators I've used both do it in a fixed order of salary then dividends
    Plus Example 6 on this HMRC factsheet shows salary being taxed first.
    www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet


    Are the accountants right that you can just tax things in whichever order you want?


    Thanks
    Last edited by PTP; 5 January 2018, 19:26.

    #2
    Nope.


    HTH
    See You Next Tuesday

    Comment


      #3
      Are the accountants right that you can just tax things in whichever order you want?
      No. Dividends are the top slice.

      LMGTFY
      Taking a break from contracting

      Comment


        #4
        Thanks Chopper for pointing out Top Slice as the keyword to search for.

        Still.....confusing search results

        I came across this which supports what the accountant is saying.......good news :-)
        www.rossmartin.co.uk/directors/tax-efficient-remuneration/1591-summer-budget-2015-dividend-tax#overview-and-examples
        under the heading "Alternative version to HMRC's Example 6"

        Whereas a number of other sites say the opposite
        Income tax rates and taxable bands and order of taxation


        Confusing ???
        Last edited by PTP; 5 January 2018, 22:55.

        Comment


          #5
          Have a look at 68-71 here
          http://www.sa2000.co.uk/2017-exc-indi.pdf

          I can’t find where this is in HMRCs website, they themselves link out to it. https://taxagents.blog.gov.uk/2017/0...oints-meeting/

          It’s become far too complex.

          Comment


            #6
            Dividend tax

            As said above, dividends are top slice as explained in the HMRC guidance 'Add your income from dividends to your other taxable income ':

            https://www.gov.uk/tax-on-dividends

            Hopefully this helps.

            Comment


              #7
              And I thought the order was whichever provided most money to HMRC....

              Comment


                #8
                Invest GBP 25 in TaxCalc and do your own self assessment return, then if your accountant is wrong, complain and get the GBP 25 off them as compensation.
                Public Service Posting by the BBC - Bloggs Bulls**t Corp.
                Officially CUK certified - Thick as f**k.

                Comment


                  #9
                  I think your wires are slightly crossed.

                  It isn't the fact you can tax income in whatever order you like, it is that you can offset your personal allowance against whichever income gives you the best financial outcome.

                  The norm is to offset PA against salary first, but with the new dividend tax it can sometimes be better to set it against higher rate dividends first, rather than basic rate salary.

                  I think this is probably what your accountants are referring to.

                  Comment


                    #10
                    Originally posted by craigy1874 View Post
                    The norm is to offset PA against salary first, but with the new dividend tax it can sometimes be better to set it against higher rate dividends first, rather than basic rate salary.
                    Even with NI?

                    Comment

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