Tax on share dividends

Pauline123_2

HELP - My friend is VERY worried but buries her head in the sand.

They have shares that they have had for about 12 years - these are registered at the parents address and some of which were bought in her Mother's name!
They filed tax returns for 2 years listing the shares(the ones in her own name) -this was about 10 years ago but they have not been asked to do one since. They are on PAYE and have been a higher rate taxpayer for a number years.
The shares dividend is about £700 - £1100 per year.

How should they inform the taxman?
What information will the taxman require?
What will the taxman do when(if) she tells them?
They seem to think that if they do nothing then nothing will happen - is the taxman likley to find out?

they are worried so any advice would be greatfuly received.

zygurat789

Pauline123 wrote: »

HELP - My friend is VERY worried but buries her head in the sand.

They have shares that they have had for about 12 years - these are registered at the parents address and some of which were bought in her Mother's name!
They filed tax returns for 2 years listing the shares(the ones in her own name) -this was about 10 years ago but they have not been asked to do one since. They are on PAYE and have been a higher rate taxpayer for a number years.
The shares dividend is about £700 - £1100 per year.

How should they inform the taxman?
What information will the taxman require?
What will the taxman do when(if) she tells them?
They seem to think that if they do nothing then nothing will happen - is the taxman likley to find out?

they are worried so any advice would be greatfuly received.

The only shares your friend has are those registered in his/her/joint names. Whose name are these shares in and what is the net dividend from these shares?
What is the make up of the tax code from the P2 (coding notice) for those who own these shares.

Pauline123_2

Thank you zygurat789 for your reply.

Sorry if it wasn't clear - here goes again.

My friend, she, bought some shares and these are registered in her name but registered at her parents address. At the same time she also bought shares and registered them in her Mothers name, with her mothers knowlage. Basically she has paid for shares registered in her own name and her Mothers name and both registered at her Mothers address.

She has discovered that from a few years back her Mother has been paying the dividends,from the shares registered in her Mothers name into her(the daughters - my friend) savings account.

The net dividend from the shares registered in my friends name ranges from about £700 - £1100 net. I think it was the dividends from the shares registered in her own name that she used in her tax returns.

I don't know what her(my friend) tax code is and I don't want to question her too much more.
Her mother is retired and quit elderly.

Pauline123_2

just to make it clear my friend does not live at the same address as her parents and so the shares in her name are not registered at her home address but at her parents

Voyager2002

I understood that tax was deducted at source from dividend payments made by companies registered in the UK (a much-criticised reform introduced by Gordon Brown). So it is entirely possible that there is no tax liability, only the possibility of penalties for failing to submit a tax return on time.

dzug1

The shares registered in the mother's name are - probably - irrelevant - as is - probably - the gifting back of interest. Assuming the mother is not a higher rate tax payer

The addresses are irrelevant apart from maybe the possibility of being found out

What matters is the dividends on the shares registered in your sister's name which she should (if a higher rate tax payer) have been paying extra tax on. It's possible she has been paying though her tax code - if so this amount will have been estimated and is almost certainly wrong - but if not she owes that extra tax, plus penalties for late or non payment

I don't know what stance HMRC will take when told. Declaring it for the current or a recent year may or may not provoke their curiosity

zygurat789

Voyager2002 wrote: »

I understood that tax was deducted at source from dividend payments made by companies registered in the UK (a much-criticised reform introduced by Gordon Brown). So it is entirely possible that there is no tax liability, only the possibility of penalties for failing to submit a tax return on time.

It is correct to say that tax is deducted at source from dividends, it always has been, you can't blame GB for that, however, it is only at the ordinary dividend rate applicable to basic rate tax payers. Tax payers paying higher rate tax, 40%, have to pay the upper dividend rate in much the same way as they have to pay higher rate tax on their building society interest. This is either paid through self assessment or by a reduction of the code number.

So Pauline we need the information on the code number to progress this further.

le_loup

Voyager2002 wrote: »

I understood that tax was deducted at source from dividend payments* made by companies registered in the UK (a much-criticised reform introduced by Gordon Brown).** So it is entirely possible that there is no tax liability***, only the possibility of penalties for failing to submit a tax return on time.

* Dividends have a tax credit attached
** Totally untrue.
***higher rate tax payers have to pay some more.*


Best to give advice here on things you actually know about.

Voyager2002

le_loup wrote: »

* Dividends have a tax credit attached
** Totally untrue.
***higher rate tax payers have to pay some more.*


Best to give advice here on things you actually know about.

Agreed.

However, people who actually knew about this were slow to respond: I am pleased that my misinformation has provoked some well-informed responses.

zygurat789

Voyager2002 wrote: »

Agreed.

However, people who actually knew about this were slow to respond: I am pleased that my misinformation has provoked some well-informed responses.

I feel that's a bit hard, yes it took me 6 hrs 49 mins to respond but they were normal sleep hours and I do like breakfast.
And I do feel I covered all the bases and asked for all the relevant additional information required so necessary before giving any advice, all without introducing technical complications.

John_Pierpoint

It is provably only a matter of time before the increasing use of "data matching" throws up anomalies.
Now tell us that her name is Smith..

It is just possible that mum is losing her age allowance because she has too much income - though as the personal allowance goes up this tax trap becomes less significant

Might mum be liable for InHeritance Tax at 40% ?