Tax on Share dividends

lle

I have just received my new tax code for 2024/5 tax year. On it there is a new category for dividend tax. It seems they are taxing me for dividends I have received on shares I own in the last tax year as well as projected dividends this year. I have never paid this before and do not understand why I should. I am a pensioner with a state pension - the lower women's one as I reached state pension age in 2015. I also have a small company pension (old final salary type) and money purchase type pensions from various employers which were put into a SIPP  when I stopped working. Until last year, the total of my state pension and final salary pension was just under the single persons allowance. I had only withdrawn the tax free part of the SIPP. In the last tax year both pensions increased as they were index linked and  so did interest I got from banks and building societies so it just pushed me into paying income tax. My dividend income was only £320, I understand the first £1000 was free of tax. Can anyone explain why I am now having to pay £137 tax on £320. .
My dividends have been more in the past, but never above £1000. 

Voyager2002

Get hold of your tax calculation.

wmb194

lle said:

I have just received my new tax code for 2024/5 tax year. On it there is a new category for dividend tax. It seems they are taxing me for dividends I have received on shares I own in the last tax year as well as projected dividends this year. I have never paid this before and do not understand why I should. 

I am a pensioner with a state pension - the lower women's one as I reached state pension age in 2015. I also have a small company pension (old final salary type) and money purchase type pensions from various employers which were put into a SIPP  when I stopped working. 

Until last year, the total of my state pension and final salary pension was just under the single persons allowance. I had only withdrawn the tax free part of the SIPP. In the last tax year both pensions increased as they were index linked and  so did interest I got from banks and building societies so it just pushed me into paying income tax. 

My dividend income was only £320, I understand the first £1000 was free of tax. Can anyone explain why I am now having to pay £137 tax on £320. .
My dividends have been more in the past, but never above £1000. 

You need to ask HMRC what it thinks it knows and what it's assuming. This wouldn't be the first time its assumptions could be hopelessly wrong.

lle

I've been trying to phone them for five days all I get is a robot. I am currently on hold yet again, 15 minutes so far. At this rate the cost of phone calls will be more than the tax they're trying to make me pay. 

kempiejon

lle said:

I've been trying to phone them for five days all I get is a robot. I am currently on hold yet again, 15 minutes so far. At this rate the cost of phone calls will be more than the tax they're trying to make me pay. 

I had some success trying the web chat. No call fee and it seem easier to me to be on hold in a web page.
https://www.tax.service.gov.uk/ask-hmrc/chat/online-services-helpdesk
It does require some patience and sometimes there are just no advisors.

Dazed_and_C0nfused

lle said:

I have just received my new tax code for 2024/5 tax year. On it there is a new category for dividend tax. It seems they are taxing me for dividends I have received on shares I own in the last tax year as well as projected dividends this year. I have never paid this before and do not understand why I should. I am a pensioner with a state pension - the lower women's one as I reached state pension age in 2015. I also have a small company pension (old final salary type) and money purchase type pensions from various employers which were put into a SIPP  when I stopped working. Until last year, the total of my state pension and final salary pension was just under the single persons allowance. I had only withdrawn the tax free part of the SIPP. In the last tax year both pensions increased as they were index linked and  so did interest I got from banks and building societies so it just pushed me into paying income tax. My dividend income was only £320, I understand the first £1000 was free of tax. Can anyone explain why I am now having to pay £137 tax on £320. .
My dividends have been more in the past, but never above £1000. 

The tax code system is designed to use a previous tax years information as an estimate for the current tax year.

The final position will always be reviewed after the end of the tax year once you know the actual dividend income received (and have told them of the actual figures).

The first £500 (previously £1,000 or more) of dividend income isn't tax free, you have misunderstood that.  Dividends from ISA's are tax free/tax exempt.  Normal dividends outside a tax wrapper such as a pension or ISA are all taxable.

But in the current tax year the first £500 of dividend income is taxed at 0%.

Is it possible that you haven't provided HMRC will details of dividends received in recent years and they are simply using an old figure?

Can anyone explain why I am now having to pay £137 

If the tax code deduction is £137 then you would be paying an extra £27.40* on your pension income.  Which may still be wrong.  Or have you yourself calculated the £137 based on a different amount in your tax code?

* this assumes you aren't Scottish resident for tax purposes.

Dazed_and_C0nfused

From the figures provided it could well be HMRC have an estimated dividend income figure of £813.

Which you can update to whatever you think is realistic for the current tax year.

lle

Finally got through to HMRC (Think it was still called Inland Revenue when I started the call!). Apparently they were guestimating the dividend  this year, based on the figure I gave them in 2010 - the only year I was self-employed and filled in a self-assessment form. Since I have been gradually selling shares since retirement, dividends are well under half what they were back then. I naively thought that HMRC received details of dividends from share registrars, like they get all the details of your bank and building society interest, but apparently not and you have to tell them the correct amount at the end of each tax year. In this current tax year the threshold for paying dividend tax has reduced to £500.