“Dividend Tax” on PAYE coding notices?

We have seen “dividend tax” as a deduction appearing on some 2016/17 PAYE coding notices.

This year sees the change in the taxation of dividend payments with dividends that fall outside the £5,000 dividend allowance being taxed at 7.5%, 32.5% and 38.1% depending on an individual’s level of income. [Dividends are always the final form of income added when the calculation of a person’s tax on income is calculated].

This means an increase in the taxation of dividends for many company owners/directors.

To clarify the “dividend tax”, as quoted on these notices, is not a tax but is an estimation of tax that may be payable – dividends paid may vary depending on a company’s performance, fluctuating profits and changing tax regimes and may also vary depending upon the other elements of the individual’s income mix for a specific year. The calculations can be complex and may not be easy to estimate until much further into a year.

Is this HMRC attempting to get tax payments in sooner – absolutely! Can you object – absolutely too!

Can HMRC include this deduction in the PAYE code? Yes, but only if the individual does not object.

Objections can be made by telephone to HMRC or on-line by completing a form and it should be a fairly straight-forward matter to get the PAYE coding revised.

Confused about your PAYE coding, unsure of the changes to tax rates and how these impact you?

Unsure about the tax implications for your income this year?

Call Winchester Bourne on 01962 715671 or email sarah@winchesterbourne.com

 

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