Paying tax on shares as a child

Kirsty1990

This is quite vague as I don't know where to start !
I received a lump sum from my local council from an accident as a child which they were liable for.
The money was invested into shares until I turned 18 with legal and general
My question is, I paid tax on these shares each year from the age of 3 to 18.
I am able to claim or entitled to any of this tax back? And if so , does anyone have any idea of the process or where to begin!?


Thank you in advance!

eskbanker

Perhaps questions for whoever is/was the trustee for the money, but what was the account used and what tax was charged?

Children aren't exempt from taxation as a matter of course but there would normally be an expectation that such arrangements would be set up in as tax-efficient a manner as possible....

BoGoF

And if you are talking about the tax credit on dividends then these are not repayable.

Aegis

For most of that time, dividends from shares were effectively taxed at source and non-reclaimable, while for the last couple of years the dividends have been paid gross. As such, it's unlikely you have any income tax to reclaim on dividends.

If some of the shares have been in unit trusts or OEICs which produced interest rather than dividends, there may be something to reclaim, as these used to be paid net of basic rate tax by default but were subject to reclaim for non-taxpayers. It's unlikely you would be able to go right back to age 3 with such claims - you'll need to speak to an accountant to see if there's any ability to go back more than 6 years (from memory).

In terms of capital gains tax, you would have had to complete tax returns to pay that, and therefore will already have used your allowances wherever possible.

In short, it's possible there's something to reclaim, but far from guaranteed.

Spidernick

You are probably out of time to claim a refund in any case. In normal circumstances the deadline for 13/14 is today and earlier years are already out of date.

bowlhead99

When you say *you* paid tax on the shares each year, did you really? As in, you received a gross dividend and then paid money over to HMRC, even though you had enough personal allowance to cover the income so should not have actually paid over any tax

Or do you mean that when you received a dividend from time to time it came with a dividend voucher confirming that you were getting paid a dividend cheque for - for example - £90, and a tax credit of £10 against your notional taxable income of £100, meaning there was nothing further for you to pay over to HMRC if you were only a basic rate (or lower) taxpayer ?

The latter case is a historic quirk of the tax system which is supposed to encourage investing by recognising that the companies in which you invest have paid some corporation tax on their profits before distributing their spare taxed earnings as profits. So you could have a credit against your tax bill on your dividends - resulting in nothing to pay if you're a basic rate taxpayer (or non taxpayer) and a nice reduced rate if you were a higher rate taxpayer.

However, in that situation (of getting a £10 credit on a £100 notional dividend and taking home £90 for yourself), if you were a non taxpayer you couldn't claim this 'credit' back because you hadn't personally paid any tax anyway - the credit system was only notional to help give some people a lower effective tax rate. As someone who hadn't paid tax anyway, and received the full £90 which the company declared, there's literally nothing to claim.

Basically UK companies and funds *don't* withhold tax from the dividends they declare and pay that to HMRC as income tax on your behalf. So if you haven't paid any tax direct yourself to HMRC, out of the cheques you received, you basically have not paid any income tax on those dividends you were getting.

If you *have* made some direct payments to HMRC to pay tax liabilities on your income, presumably you wouldn't have done that without you or your parents working out how much income you earned and how much tax liability you had on it. You wouldn't have paid them cash just for fun. If your family did calculations and paid the tax, it's a bit late to say 16+ years later that actually all the calculations were wrong and you had sent the tax man far too much money over the years and now want it back.

Generally it is possible if you have paid too much tax to go back a few years and change the records and get a refund. But not decades. The starting point would be:

- how much tax have you *actually* paid to HMRC in each of the tax years (not notional amounts appearing on tax credit slips when receiving dividend cheques, but actual cold hard cash paid out of your bank accounts to HMRC)

- if that amount is more than £0 for any of the tax years, what are your grounds for suspecting the amount is incorrect?

As Aegis says, if some of the payments to you weren't "dividends" but instead "interest distributions" it's possible you'll have had interest withheld at source just like banks used to withhold tax at source on the interest they paid. If the interest was below your various annual allowances there is scope to reclaim it but not for many of the years. You don't mention whether you are now 18/19 years old or 25, 30, 40 in which case those years are too far back to reopen.

eskbanker

bowlhead99 wrote: »

You don't mention whether you are now 18/19 years old or 25, 30, 40

I'd guess 27 or maybe 28....

bowlhead99

eskbanker wrote: »

I'd guess 27 or maybe 28....

Well yes but I'm not 18 or 19...

eskbanker

bowlhead99 wrote: »

Well yes but I'm not 18 or 19...

Indeed, many 18/19 year olds, as fully paid-up members of the limited-attention-span txt spk generation, would struggle to construct an entire sentence, never mind copious paragraphs of epic prose!

Do you perhaps like ice cream then?

PeacefulWaters

bowlhead99 wrote: »

Well yes but I'm not 18 or 19...

Well done on your shortest ever post!