Tax payer... or not ?

longforgotten

In the new tax year my husbands income will be below his personal allowance. His income includes some dividends, so there's tax paid that he cannot claim back.

If he continues to give to charity is he a tax payer or not ? I would say he can still say he's a tax payer ( tick box for gift aid )when the tax claimed by the charity on his donation is the same or less than the tax paid on his divis.

What do you reckon ?

HappyMJ

Yes I don't see why not...as long as the tax paid is enough.

See http://www.hmrc.gov.uk/individuals/giving/gift-aid.htm for a more detailed explanation.

jem16

longforgotten wrote: »

In the new tax year my husbands income will be below his personal allowance. His income includes some dividends, so there's tax paid that he cannot claim back.

There is no income tax paid on dividends. It's a 10% tax credit against any income tax due.

http://www.hmrc.gov.uk/taxon/uk.htm#4

If he continues to give to charity is he a tax payer or not ? I would say he can still say he's a tax payer ( tick box for gift aid )when the tax claimed by the charity on his donation is the same or less than the tax paid on his divis.

What do you reckon ?

I would say he is not a taxpayer if his total income including dividend payments (plus tax credit) is below the personal allowance.

notanewuser

Dividends are tax free to the individual on up to £37k.

As DH and I pay no income tax, we cannot Gift Aid. Your husband is in the same situation.

agrinnall

If you just tick the box anyway what are the chances of HMRC actually checking every gift aid declaration against the person's tax records? While I suppose a few might be found by random audits I'm sure it wouldn't be cost effective to check en masse.

heretolearn_2

Don't tick for gift aid if you aren't entitled.

Claims do get audited - not all, but some, and there's no telling when any particular charity will be audited.

when they find claims that are invalid, it causes a lot of problems for the charity. If for example, the HMRC pulls out 50 donors to check out and finds that 5 of them are invalid or untraceable, it'll say that means 10% of all the claims are invalid, and cut the charity's gift aid money down by 10% on the whole lot.

longforgotten

See http://www.hmrc.gov.uk/individuals/giving/gift-aid.htm for a more detailed explanation.

I have copied & pasted the following from the above link .......



You don’t necessarily have to be working to be paying tax. Apart from tax on income from a job or self-employment, the tax you’ve paid could include:

• tax deducted at source from savings interest
• tax on State Pension and/or other pensions
• tax on investment or rental income (including tax credits on UK dividends)
• Capital Gains Tax on gains

Pennywise

jem16 wrote: »

There is no income tax paid on dividends. It's a 10% tax credit against any income tax due.

http://www.hmrc.gov.uk/taxon/uk.htm#4



I would say he is not a taxpayer if his total income including dividend payments (plus tax credit) is below the personal allowance.

I'd disagree. Dividends are taxable income, but they are taxed at 10% for those under the higher rate threshold which is the same as the "tax credit" so no further tax is due.

So the limit for gift aid would be the amount of dividends if there is no other income.

jem16

Pennywise wrote: »

I'd disagree. Dividends are taxable income, but they are taxed at 10% for those under the higher rate threshold which is the same as the "tax credit" so no further tax is due.

I agree that dividends are taxable income and if the taxpayer was only above the personal allowance by the amount of the dividend plus tax credit, then no further income tax would be due as the 10% tax credit satisfies any liability.

However a non taxpayer cannot reclaim the 10% tax credit as no income tax has actually been paid.

From the HMRC link I gave earlier;

Can you claim the tax credit if you don't normally pay tax?

No. You can't claim the 10 per cent tax credit, even if your taxable income is less than your Personal Allowance and you don't pay tax. This is because Income Tax hasn't been deducted from the dividend paid to you - you have simply been given a 10 per cent credit against any Income Tax due.

jem16

longforgotten wrote: »

You don’t necessarily have to be working to be paying tax. Apart from tax on income from a job or self-employment, the tax you’ve paid could include:

• tax deducted at source from savings interest
• tax on State Pension and/or other pensions
• tax on investment or rental income (including tax credits on UK dividends)
• Capital Gains Tax on gains

I would take that to mean if dividend payments plus tax credits take you over your personal allowance but under higher rate tax, then yes you are a taxpayer but you have no tax to pay as the tax credit satisfies the tax liability.

That is different to someone whose total taxable income including dividends and tax credit is under the personal allowance. They have paid no tax.

longforgotten

Here's the entire entry from the hmrc link : -


Making sure you’ve paid enough tax to use Gift Aid

You can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax the charity or CASC and any other charities or CASCs you donate to will reclaim on your gift. A tax year runs from 6 April one year to 5 April the next. If you make a number of Gift Aid donations, you will need to consider the tax you’ve paid on each donation on an accumulative basis. If you don’t pay enough tax you will need to pay any shortfall in tax to HMRC.
You don’t necessarily have to be working to be paying tax. Apart from tax on income from a job or self-employment, the tax you’ve paid could include:

• tax deducted at source from savings interest
• tax on State Pension and/or other pensions
• tax on investment or rental income (including tax credits on UK dividends)
• Capital Gains Tax on gains