Dividend Tax Payment Question

[TheCyclingProgrammer]

Putting aside tax as you take the dividends is the best approach but as I said, if you take most of your dividends in March you'll be due to pay your first payment on account before you've taken the dividend.

If you prefer to take the dividends in bigger lumps might be better to try and take them before the end of January.

[Ebenezer]

Yes, I saw my own post.

Payments on account are not made in advance though. Not normally anyway.

There is a slightly inconvenient scenario when you take lumpy income, such as irregular dividends or push most of your earnings to the end of the tax year.

In that scenario it is possible to know you'll earn £X in a tax year and make payments on account to that effect but if you pay more than half of that income between Feb and the end of the tax year then yes technically you'll be paying some tax in January before you've earned it.

This should only be an issue if you haven't planned ahead though.

Er, this describes me exactly. Top up the whiskey and cigars fund occasionally during the year, then pay out up to the HRT threshold at the end of March. Is there an argument for revising this arrangement in light of the new rules?

In a previous life, when I had perm salary + self employed income, I used to manage this by putting aside 40% of all the "extra" income when I received it, so I'd always have the cash ready for the following year. I had been thinking of a similar arrangement (different percentage!) to cope with the new dividend tax rules.

[SueEllen]

You got me on that one !

There was a spammer on here yesterday writing rubbish everywhere hence CP's post about tax up front.

[kaiser78]

Yes, I saw my own post.

You got me on that one !

[TheCyclingProgrammer]

Yes - this what I was referring to.



Please see above.

Yes, I saw my own post.

Payments on account are not made in advance though. Not normally anyway.

There is a slightly inconvenient scenario when you take lumpy income, such as irregular dividends or push most of your earnings to the end of the tax year.

In that scenario it is possible to know you'll earn £X in a tax year and make payments on account to that effect but if you pay more than half of that income between Feb and the end of the tax year then yes technically you'll be paying some tax in January before you've earned it.

This should only be an issue if you haven't planned ahead though.

[WordIsBond]

Last time I checked, the tax year for 17/18 runs April 17 to April 18. Paying half the tax for that period in January 18, when that period is 3/4 complete, and the other half of it in July 18 when that period is finished, is not paying tax "up front". It is paying it earlier than the date you have to file SA, but it is paying it after you have received the related income, and so is assuredly not "up front."

[kaiser78]

Don't forget if you're not already making payments on account that the new dividend tax will likely result in payments on account going forwards, so when you submit your tax return after April next year, you'll owe the dividend tax for 16/17 (just over £2k if you go right up to the higher rate threshold) plus half again for 17/18 by end of Jan 18 and the other half in July 18, so best to put aside 7.5% of all dividends in excess of your personal allowance + the £5k dividend allowance *as you pay yourself* so you're not caught short.

Yes - this what I was referring to.

Nobody pays tax up front.

Please see above.

[TheCyclingProgrammer]

Are you referring to the fact that 50% needs to be paid up front?

Nobody pays tax up front.

[TheCyclingProgrammer]

Don't forget if you're not already making payments on account that the new dividend tax will likely result in payments on account going forwards, so when you submit your tax return after April next year, you'll owe the dividend tax for 16/17 (just over £2k if you go right up to the higher rate threshold) plus half again for 17/18 by end of Jan 18 and the other half in July 18, so best to put aside 7.5% of all dividends in excess of your personal allowance + the £5k dividend allowance *as you pay yourself* so you're not caught short.

[Kenny@MyAccountantFriend]

The tax due on the dividends will be declared on your self assessment and then paid by the end of the following January in full.

HMRC have amended tax codes in some cases for the expected tax due on the dividends in which case it may be taxed at source or at least part of it.

[dx4100]

Its going to go on your tax return next year and then get paid in the normal way surely ?

[kaiser78]

With the new dividend tax coming into force now can someone please confirm if the new tax payable is staggered at the end of FY16/17, ie not the full amount needs to be paid straight away. I have tried reading up on this but is not clear. Any pointers welcome.