Tax on Dividends and how to reflect tax already paid

Leakingtile79

Hello all,

I have some question related to dividends, and how to declare them.

I have dividend income (non ISA) for current tax year above the £1000 allowance, which means I have to tell HRMC. So far, in previous tax years I just rang them and told them the income, and they adjusted my tax code. Because quantities were small, I did not bother making a self assessment tax return. But this year, as some of the dividend income comes from foreign countries like the US, which has a double taxation agreement with the UK ( they retain 15% tax on dividends by default), that means I already paid some taxes, so I can claim a relief in the self assessment. The reason I want to do the self assesment is that on the phone the person on the other side usually does not know how to do the double taxation agreement relief, which also is tricky and easy to mess up on the phone. See the example below with numbers:

For tax year 23/24, I had a non-ISA dividend income of £1500, which is over the £1000 allowance for dividends for that tax year. My other income (work) was £35000 and tax was already paid for it. The dividends are broken into:

£1000 dividends from UK based companies, and £500 dividends from US companies. Those £500 are net, after paying 15% tax rate in dividends, in line with the double taxation agreement between the US and the UK. Therefore, tax already paid is £500/(0.85)-£500=£88

Tax due on dividends: £1500-£1000=£500, a basic rate of 8.75% is applied: £500*0.0875=£43.75 is due in taxes to HRMC.

As I already paid £88 in taxes and there is a double taxation agreement between US-UK, I paid more than the £43.75, thus I do not owe any taxes to HRMC

So my questions are:

-How do you declare double taxation and dividends in a tax return? It will be the 1st time I have to do one as I am not self employed, but as mentioned above, I want to do it to avoid paying more tax than needed.

-Do I need to contact or add some documents related to this countries (e.g. US)? I am a UK resident.

-Do I need to include already tax income (like work) in the tax return or just the income not declared and not taxed yet?

Hope it's clear, and many thanks in advance!

molerat

for current tax year above the £1000 allowance,

The 24-25 allowance is £500.   https://www.gov.uk/tax-on-dividends

[Deleted User]

Needed my glasses for that!

You complete the tax return and include income from all sources and tax deducted thereon. Thats how your liability is worked out!

In your case you need additional sections which are chosen in the ‘tailor your return’ section - employment and foreign. A section will pop up to claim double taxation relief - £43.75 in your case - the remaining amount is ‘lost’. 

Leakingtile79

Hello @[Deleted User],

Thanks so much for your reply! 

I understand my calculations are "right" then. I have not included in them that I already paid taxes/NI in my job income (£35000). So, my understanding is I have to include tax already paid in my job for the tax year 23/24, then the calculations posted above including taxes already paid in dividends in the US ( note I posted all amounts in pounds to make it more clear).

But what section in a tax return do I fill for the tax already paid? Sorry, I am completely new to a tax return and I looked into the template and instructions, but just want to be 100% sure!

Many thanks

Leakingtile79

@molerat, for tax year 23/24, the allowance was £1000

[Deleted User]

Leakingtile79 said:

Hello @[Deleted User],

Thanks so much for your reply! 

I understand my calculations are "right" then. I have not included in them that I already paid taxes/NI in my job income (£35000). So, my understanding is I have to include tax already paid in my job for the tax year 23/24, then the calculations posted above including taxes already paid in dividends in the US ( note I posted all amounts in pounds to make it more clear).

But what section in a tax return do I fill for the tax already paid? Sorry, I am completely new to a tax return and I looked into the template and instructions, but just want to be 100% sure!

Many thanks

Have a look at the employment section - paper version. You can clearly see that tax deducted under employment appears directly after the income - as it does online - the first two entries. 

As I said you need to tailor your return at the beginning in order for the employment section to appear at all.

Box 1 and 2

https://assets.publishing.service.gov.uk/media/660bffd5fb0f77001aec6687/SA102-2024.pdf

eskbanker

[Deleted User] said:

In your case you need additional sections which are chosen in the ‘tailor your return’ section - employment and foreign. A section will pop up to claim double taxation relief - £43.75 in your case - the remaining amount is ‘lost’. 

If the only foreign income is up to £1,000 of dividends then there's no need for a foreign section to be added and the net and tax amounts can be declared via the main SA100 dividend section:



Edit: actually this won't apply for OP with total UK and foreign dividends above £1,000:

Box 6 Foreign dividends (up to £1,000)

If your only foreign income was any interest in box 3 and dividends up to £1,000 and you’re claiming deduction relief, put the net amount of foreign dividends (in UK pounds) in box 6. Put the foreign tax taken off in box 7.

If your total dividend income (including UK and foreign dividends) is over £1,000 and you’re eligible to claim deduction relief or Foreign Tax Credit Relief, do not include the foreign dividend in this box. Complete the ‘Foreign’ pages instead.

https://assets.publishing.service.gov.uk/media/6613fc00eb8a1b68a805e30f/SA150_Notes_2024.pdf

Leakingtile79

Hello @[Deleted User],

SO I will need to complete and send the employment form you linked, plus SA106 with the relevant sections filled (Page F2 of the form)? (I cannot post links yet)

I cannot find information online of people that actually completed this. Do I just complete both, attach them together and send them to HRMC?

Many thanks in advance,

Dazed_and_C0nfused

Leakingtile79 said:

Hello @[Deleted User],

SO I will need to complete and send the employment form you linked, plus SA106 with the relevant sections filled (Page F2 of the form)? (I cannot post links yet)

I cannot find information online of people that actually completed this. Do I just complete both, attach them together and send them to HRMC?

Many thanks in advance,

Whether you file online or paper you complete the full return with any additional scheduled needed.  You cannot file without an SA100.

Leakingtile79

Thanks everyone,

One more question, as I am gathering data for last year.
Do you need to include ALL your income in the tax return?
Example: I got some saving interest (100£) which is within the personal allowance, so no tax is due. DOes it need to be included?
Also, capital gains total was -£150, which is a loss, does it need to be reported as well?

Many thanks in advance, sorry if questions look to obvious!

eskbanker

Outside ISAs, savings interest is taxable income, even if taxed at 0%, so does need to be included in your self-assessment.

I don't believe that small capital losses need to be reported but it may be in your interests to do so, in terms of opening up possibilities of offsetting gains in future.