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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3936
Experience:  FCCA FCMA CGMA ACIS
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Hi, I'm employed, and taxed at source as PAYE on basic tax

Customer Question

Hi, I'm employed, and taxed at source as PAYE on basic tax rate (I earn £24k). I received a dividend from a company i own shares in of £12,500 (after 10% corporation tax was taken). I am not currently registered to complete a self assessment. The HMRC website is a little vague, should I contact them to register to complete a self assesment? I am aware there is no tax to pay, and I have no other income or investments and have received no untaxed interest.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
Unless HMRC request you to make a tax return, and the majority of tax payers are not so requested, you are only required to submit one if you are in receipt of income which has not been taxed. However, a dividend of 12.5K would push your total income to 36.6K. However after deducting your personal allowance of 10K you will be well within the basic 20% tax band, but as the 10% rate applied to the dividend is well over the permitted level so you will have probably underpaid tax for 14/15. Unless your tax office are aware of this and have reduced your code number accordingly to recover this underpayment then I would suggest that you should self assess at the conclusion of each tax year. This can be done either on paper or on line, but you may have to request a form from your tax office if you wish to use the paper version which I personally prefer.
So sorry to have to rain slightly on your parade.
I do hope I have helped show you your way forward in your tax affairs.
Expert:  bigduckontax replied 2 years ago.
Here is an extract from the House of Commons Briefing Paper on the taxation of dividends:
'For 2014/15 savings income is charged at 10% for income up to £2,880. Above this limit savings income is charged tax at the basic rate of 20%, up to the basic rate limit of £31,865. Savings income above this limit is charged at the 40% higher rate, up to the higher rate limit of £150,000. Savings income above this limit is charged at the 45% additional rate.'
So you see the 10% rate is only applicable to the first 2880 of the 12500 of dividends, the rest being taxed at the basic rate of 20% which is how an under deduction of tax may have occurred.

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