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Hello Mark, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
Yes you do have to declare this dividend with its notional tax credit on your annual self assessment tax return. If, after deduction of your Personal Allowance plus the dividend, your overall income is within the basic rate tax bracket there will be no further tax to pay as the notional tax credit on the dividend covers it. It will not affect your tax coding and even if it did your employer is not privy to any information other than the tax code to be applied to your salary.
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The dividend of GBP 400 will have a notional tax credit of 10% attached.
The basic rate tax band for 15/16 is GBP 31785 so you should not be in the higher rate tax band (40%) at all. The dividend will be grossed up for tax giving you an income of 32400. From this deduct your personal allowance of 10.6K [15/16 rates]. Of this 21185 will be taxed at 20%. The tax deducted through PAYE and the notional tax on the dividend will offset this liability and you should have no outstanding sum to settle by 31 January 2017. You will, of course, have to declare your PAYE income and the tax deducted on your self assessment tax return also. You only have to declare in round pounds.
In 16/17 the taxation of dividends changes as follows [source: Gov UK web site]:
'You’ll pay tax on any dividends you receive over £5,000 at the following rates:
So in your case from the 16/17 tax year your GBP 400 dividend income would be tax free.
HMRC may, in the longer term, adjust your tax coding in an attempt to make you tax neutral at the conclusion of each tax year, but this would appear unlikely in the light of your taxable income being well below the 40% tax threshold..
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