Reclaiming Tax on dividends.

sorcerer

I have a P2P investment trust sitting outside of my ISA, it pays a dividend in the form of interest, they took 20% Tax from source. I know you get a £1000 tax free allowance, can I claim this back from the tax man under the tax free allowance.


Also I hold a REIT in the UK also outside a tax wrapper, this pays a PID, which is neither a dividend or interest, do you think the 20% can be reclaimed on this also?

bowlhead99

If the money given to you by the investment trust has been streamed from their interest income and designated as an 'interest distribution' rather than a corporate dividend, you are right that you can use your interest allowance to cover it (afaik). So if tax has been deducted at source you can claim that back through your tax return - or perhaps just by writing to HMRC if you're not otherwise required to do a tax return).

However, as you mention, property income distributions that you get from a REIT or PAIF are not corporate dividends and they are not interest income, so you can't use either your dividend allowance or your interest allowance. You'll owe income tax at your normal marginal rate. If 20% is your marginal rate, you're fine, because that's what has been deducted already - but if you're a higher rate taxpayer you will owe HMRC some extra money and you should tell them and pay it.

xylophone

http://www.landsecurities.com/investors/shareholder-investor-information/uk-reit-taxation

Re taxation of REITS.






PIDs are taxable as property letting income in the hands of shareholders and are not 'dividends' for the purposes of the new UK dividend taxation regime. HMRC income tax returns contain a separate box ("other income") and explanatory notes to enable individual taxpayers to report their PID income. Shareholders whose rate of UK income tax is less than 20% or who do not pay tax at all, perhaps because of personal allowances or other reliefs, may be able to reclaim the difference from HMRC.

bowlhead99

We did already have the discussion with sorcerer about how his property income distributions were taxed at source at standard 20% and were not eligible to be covered by the dividend allowances:

https://forums.moneysavingexpert.com/discussion/5612864

xylophone

Sorcerer seems to be concerned about tax on the PID which, as has been noted is "other income".

I am wondering about his tax situation.

In February he said

The annoying thing last year, because worked screwed up I ended up paying tax of £2.05p. Which will probably result them in sending me another one. But I am anticipating 2016/17 to be £0, as long as work get their figures right. Wait for my P60 on that one I guess.

The information in post 3 may be relevant to his situation.

bowlhead99

Yes, I'm not suggesting it couldn't be relevant, if he doesn't have any taxable income, and your post is correct of course.

But the reference to the £2 on that other thread was the difference between what tax he'd paid via work PAYE and what tax HMRC actually considered he owed on his work income- and due to a work screw-up, that difference was £2. This year he hopes work will get it right and the difference will be zero. But the taxable income and tax paid was non-zero