Personal allowance after dividends

joee86

Dear all,

I have recently received a dividend of £22k. My salary is £75k and I have already received a bonus of £37.5k.

As a result, HMRC believes my income will be £112.5k and my personal allowance has been reduced to reflect this. I intend to pay what I owe on the dividend at the end of the tax year.

However, I have just realised that my income when all combined is £134.5k and therefore I believe I have no personal allowance at all.

Is this therefore added into the calculation when I do a tax return at the end of the tax year? Or should I being paying more tax now due to no allowance and then take this into account when I do my tax return?

i spoke to HMRC and they didnt seem to understand. I am not trying to avoid paying at all, rather just want to be paying the correct amount at the correct time. 

Any help would be great.

Thanks

Dazed_and_C0nfused

Your Personal Allowance is based on your adjusted net income (ANI) and dividends form part of your ANI.

So unless you have fairly sizeable pension contributions or Gift Aid payments, which both reduce your ANI, then you won't be due any Personal Allowance in the current tax year.

There really isn't a correct time in this situation and you essentially have two choices,

1).  Notify HMRC of the dividend income and they will adjust your current tax code to try and collect some additional tax during the year.  Doing this will not alter the fact that you will need to provide full income details on a Self Assessment return after 5 April next year.  Any extra tax deducted during the year will be reflected on your P60 and,  assuming you complete the return correctly, help reduce any tax payable via Self Assessment

2).  Do nothing now and file your return knowing you will more to pay via Self Assessment but later.  You will have to pay the tax due for 2021:22 by 31 January 2023.  This assumes you won't have payments on account to pay for 2021:22 if you are filing a 2020:21 Self Assessment return.

Finally, if the amount due under Self Assessment for 2021:22 is less than £3,000 and you file your return before 31 December 2022 then it is possible, if you are still earning decent money, to pay the tax via your 2023:24 tax code.  Effectively deferring paying some of the tax by another 14 months (it will be spread evenly between  6 April 2023 and 5 April 2024 each time you are paid).