Dividend Tax / Self Assessment

[philip@wellwoodhoyle]

31 years... Honestly, I think this last year is the most complicated personal tax calculation I've seen. No wonder even SA Online was wrong at first.

You're in for a treat re top slicing relief then. I went on a Giles Mooney course in December (Tim Good's partner - the guy who realised the personal allowance allocation issue and told HMRC they were wrong!). He's now discovered that top slicing relief claims will also be wrong for similar reasons - apparently there's a bit in the middle of the calculation which everyone forgot about because it never made a difference to the end result, but now it does! The calculations shown at the course by Giles were mind-blowing, as was the potential difference in tax due! So top slicing relief claims calculated by HMRC and their approved software are now probably wrong too! I suspect that there'll be more and more coming out of the closet in time.

[Jessica@WhiteFieldTax]

Im a tax advisor of 18 years and its the first year it has ever been beneficial!

31 years... Honestly, I think this last year is the most complicated personal tax calculation I've seen. No wonder even SA Online was wrong at first.

[craigy1874]

Im a tax advisor of 18 years and its the first year it has ever been beneficial!

[PTP]

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.

You've hit the nail on the head craigy1874

Yes they've made it a bit clearer now that this is what they are doing. Having the choice between offsetting PA against salary or dividend first is a lesson for me.

[Darren at Fox-Bartfield]

Dividends

Dividends and investment income form the top slice of the tax calculation, so take all your income then add the dividends on top.......then any dividends that fall into higher rate would be taxed at 32.5%

[SeanT]

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?

[craigy1874]

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.

[Fred Bloggs]

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.

[BrilloPad]

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

[Chart Accountancy]

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.

[Jessica@WhiteFieldTax]

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.

[PTP]

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 ???

[chopper]

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

No. Dividends are the top slice.

LMGTFY

[Lance]

Nope.


HTH

[PTP]

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