HMRC Letter

[swissmike]

For 2005\2006 SA, I owed a few hundred quid in tax as had taken quite a high salary that year and taken dividends over the 40% threshold.

Came home to a letter yesterday asking if I would like future dividend tax factored into my tax code from 2008.

They are going to automatically do this unless i write and inform them otherwise.

Obviously I will get in touch and state I do not want this. I'm now setup so that I should not pay any income tax on dividends. Just wondered if anyone else had seen this?

Also what would they base the change to the tax code on? That few hundred quid from one years SA? A bit mad as dividends are based on profits and therefore can change year on year.

Seems a bit of a desperate way to be trying to get additional taxes in up front.

Don't like being on their radar

[malvolio]

It's fairly routine, no need to worry. Tell them you're not intersted and they'll drop it.Usual rule for the assessment is to take last year's earnings as the baseline and ask for the higher-band tax up front in two 6 mothly payments. As you say, this can go wrong (especially if you take a long break, like I just did), but you can ask for the prepayment to be deferred or reduced. In your case, it's not worth the bother, TBH, they wuld just drop the tax code by a few points.

[Ivor1]

Standard practice, I have to pay my tax on account each year which isnt nice, for tax year Apr 2006- Apr 2007, I had to make 50% payment in Jan 07 and then second 50% Jul 07, and they calculate what you owe for that year based on the previous year 05 - 06.
You can say you recon you will earn less and they reduce the payment, but if you end up paying less than you should (on account) they will charge you interest.

I wouldnt have it on my tax code just pay it.

[swissmike]

Thanks for the swift response guys...

I am taking 6 month break this year so won't come near the high rate tax band, and hope to ensure I stay under it in the future too

[ASB]

If you were in the higher rate band last year and don't expect to be this year then you need to appeal your payments on account down to zero. If you don't do this you are still liable for the payments on account and interest.

If you do appeal it to zero and it turns out that you are a higher rate taxpayer and should have made payments on account then interest will be payable based on when the payment should have been made.