Any issue with HMRC 2023/24 SA tax calculation

Problem with dividends under £1,000 when total income goes marginally into 40%

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HMRC calculates a liability of 20% on dividends

 

Replies (22)

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Stepurhan
By stepurhan
08th Apr 2024 10:02

Is their total income over £100,000? I think you will find that is the reason.

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Danny Kent
By Viciuno
08th Apr 2024 10:04

Not enough detail to even remotely hazard a guess as to what the issue is.

However FWIW the dividend allowance for 2023/24 tax year was £1,000, so dividends should not be incurring any liability.

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By Duggimon
08th Apr 2024 10:07

Care to give us some numbers to check? My software gives no tax to pay on £800 in dividends with a salary of £49,800, which is as expected but seems to fit the criteria you suggest.

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By rmillaree
08th Apr 2024 10:10

for any tax calc we need full details of tax calc end of. Without full details we cannot advise what factors may be at play - this is particulalry the case now for anyone earning over 50k !

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DougScott
By Dougscott
08th Apr 2024 10:14

Are you saying you are using HMRC software to do a 2023/24 tax return and it is calculating income tax at 20% on the dividend income?

Obviously there should be no tax on dividend income under £1000.

Better recheck you have entered the TR correctly and do a manual calculation to check.

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By Paul Crowley
08th Apr 2024 10:25

That seems unlikely. Dividends have their own rates of tax, and an allowance.
If true then all agent software calculations are not in line with HMRC

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Replying to Paul Crowley:
By SteveHa
08th Apr 2024 15:54

The "dividend allowance" is, however, incorrectly named. It's a Nil rate band. It becomes relevant when cliff edge income levels are in point.

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Replying to Paul Crowley:
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By rmillaree
08th Apr 2024 16:55

i suspect the op means the effective rate of tax on the dividends works out at 20% when added in. thats entirely possible - without full calcs though that complete speculation .

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Replying to rmillaree:
By SteveHa
09th Apr 2024 08:47

It's possible, but I can't think how (as you say without seeing the calcs). Dividends form the top slice of income, so even if other income totalled £50,200 and £500 dividend income on top of that, the £500 would still be taxable at 0%.

I can't fathom any reason why dividends of up to £1,000 would suffer tax, or cause other income to be taxed. HR taxpayer on less than £100,000 - possibly HICBC comes into charge because of the dividend?

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Replying to SteveHa:
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By rmillaree
09th Apr 2024 12:09

ok how about the HICBC - that can creat a liability very close to 20%

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Replying to SteveHa:
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By rmillaree
09th Apr 2024 12:12

Dividends form the top slice of income,

dividends may consume the personal allowance so its possible (perhaps unlikley i concede) they are not top slice of income.

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Stepurhan
By stepurhan
08th Apr 2024 11:00

To expand on my original point, I don't think the dividends are being taxed. I think what is happening is that the total income is in the band where the personal allowance is withdrawn. This means that more other income is taxed at 40%, but it looks like it's taxed at 20% because the allowance drops £1 for every £2 over £100,000.

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Replying to stepurhan:
By Duggimon
08th Apr 2024 14:50

He says total income has just edged in to higher rate tax though, meaning a little over £50k

At least I assume so, hard to tell since he's asking the question with no numbers!

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Replying to Duggimon:
Stepurhan
By stepurhan
08th Apr 2024 14:59

True but, as others have already said, dividends should not be taxed at all at that level and aren't taxed at 20% in any case.

In the absence of the OP offering up some numbers to prove otherwise, I think my suggestion is the most likely reason for the issue.

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By Leywood
08th Apr 2024 12:32

Wow. Make an effort with the question!

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By BRIANST
10th Apr 2024 14:06

The figures are: Income from employment and pensions - £50,541, Interest - £300, Dividends £623. Total = £51,464.
Personal Allowance £12,570
Taxable £38,894
Basic Rate on £38,594 = £7,718.80
(Basic rate limit is increased by £1,104 for charitable gift aid)
Deduct marriage allowance transfer £252
Due £7,466.80.
This is from HMRC tax calculation after entering all figures on HMRC 2023/24 software. Therefore dividends are suffering 20% tax.

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Replying to BRIANST:
Stepurhan
By stepurhan
10th Apr 2024 14:47

So not my answer, but HICBC has been suggested as a possibility by others. Does that apply here?

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Replying to BRIANST:
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By rmillaree
10th Apr 2024 15:29

Therefore dividends are suffering 20% tax.

nope - it may look like that but its not

hmrc are allocating the personal alowance against the dividends and its the salary that is being taxed at 20%

this is therefore either an online exclusion case or as is more likey to be the case its that allocating dividends to then pa is saving overall tax - presumably the marriage transfer eligibility test would be failed if dividends were treated as top slice while it passes withn them in pa - final possibility is that you have found new glitch - ie it could be online filing exclusion not flagged up as such

i do know wording is sketchy ref higher rate tax and marriage transfer that its probably possible that this odd situatioon might be right - if there are any ninjas on that exact area of the legislation hopefully they will chip in.

note i dont think i have inbuilt online exclusion checker yet - so i dont know if this is online exclusion case - the list is out there though i think.

note i have proof tested calc and £100 extra gift aid makes the problem go away so that kinda strongly suggests its to do with marriage transfer limit being breached.

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Replying to BRIANST:
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By leeanthonyblackshaw
10th Apr 2024 15:30

I think this is the effect of ITA 2007, s55B(2)(ba), which looks at if income within the dividend allowance would be taxed at more than BR if the allowance did not exist.

As it would here, the HMRC algorithm allocates some PA against the divs, so your client qualifies for the marriage allowance transfer but in a limited way, as the tax amount is higher but all at BR.

(Edit: I now see rmillaree posting similar point)

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By More unearned luck
10th Apr 2024 17:53

Rmillarlee hints at a solution: if the TR has not been filed yet and if before the return is finalised (the practical deadline) 24/25 GA donations of a few hundred pounds have been made a claim can be made to carry back those donations to 23/24 on the TR25. This should restore the div allce.

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Replying to More unearned luck:
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By BRIANST
11th Apr 2024 10:48

This what I intend to do. It just seems strange that an extra £90 of gift aid donation saves £121 tax. I still think HMRC software is not working correctly

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Replying to BRIANST:
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By rmillaree
11th Apr 2024 10:55

why is that odd ?- marriage alowance has always been all or nothing everyone needs to know that and they are quite lucky if they have sneaked in on an altenative measure if their incoem is clealry over the h rate threshold.

what makes you think that the software is not working ?

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