Do I owe Dividend Tax?

HUMBUG

I'm trying to figure out whether I owe HMRC for Dividend Tax in year 22/23. 

Company Pension Earning  = £11080
Bank Saving Interest = £3953
Dividends On Shares/Funds = £2045

I worked it out like this:
My pension is less than my Personal Allowance £12570,  so I should get the full 'Starting Savings Rate ' of 5k, therefore I don't have to pay any tax on my Bank Saving Interest . 

But if I look at my Dividend of £2045 I get an allowance of £1000 , therefore I should be paying 8.75% of  £1045  = £91.44 

But can I offset my unused Personal Allowance  = £12570 - 11080 =£1490  against the £1045?  If yes , does this mean I do not owe HMRC £91.44 ?

MattMattMattUK

You should have submitted your 22/23 tax return nearly a year ago, do you mean 23/24?

Dazed_and_C0nfused

MattMattMattUK said:

You should have submitted your 22/23 tax return nearly a year ago, do you mean 23/24?

The op hasn't posted anything that shows a tax return is required. 

Company Pension Earning = £11080

Bank Saving Interest = £3953

Dividends On Shares/Funds = £2045

On that level (and types) of income you would have no tax to pay as you could allocate your Personal Allowance in such a way that all the income above your Personal Allowance is all taxed at 0%.

The above assumes you haven't applied for Marriage Allowance and didn't make any Gift Aid donations.

HUMBUG

MattMattMattUK said:

You should have submitted your 22/23 tax return nearly a year ago, do you mean 23/24?

Yes, I should have said 23/24 . 

Thanks

HUMBUG

Dazed_and_C0nfused said:

MattMattMattUK said:

You should have submitted your 22/23 tax return nearly a year ago, do you mean 23/24?

The op hasn't posted anything that shows a tax return is required. 

Company Pension Earning = £11080

Bank Saving Interest = £3953

Dividends On Shares/Funds = £2045

On that level (and types) of income you would have no tax to pay as you could allocate your Personal Allowance in such a way that all the income above your Personal Allowance is all taxed at 0%.

The above assumes you haven't applied for Marriage Allowance and didn't make any Gift Aid donations.

Many thanks again for your kind help as I find PAYE tax affairs very difficult to understand.

HUMBUG

I also do not understand the breakdown I've just received from HMRC where they have just changed my PAYE tax code for the 2nd time in a few months.  This was after I thought it best to send them details of my non-SIPP dividends already received in this financial year which totalled £2045. 

It seems that HMRC are trying to recoup any income tax I owe for 24/25  even before the tax year ends . I went online and they say my tax code has changed from K1140X to K457X  but none of it makes sense to me . 

The say my tax code has changed because:

• You now get Dividend Tax worth £675
• Your Estimated Tax you owe this year has been reduced from £11521 to £6711
• Your untaxed interest on savings and investments  has been reduced from £6955 to £4262

None of the above makes sense to me at all . Then I clicked on a button 'How we worked out your tax code' and got the following page:
                                                  Previous Tax Code      Current Tax Code
Personal Allowance                         £12570                          £12570  
Additions  
You do not have any additions          £0                                  £0

Deductions
Dividend Tax                                      £0                                  £675
Estimated tax you owe this year       £11521                           £6711
State Pension                                   £5511                             £5511
Untaxed Interest on savings and
Investments                                      £6955                             £4262
Total deductions                               £23987                           £17159
Your Total tax-free amount           -£11417                         -£4589

None of the above makes much sense to me because they haven't even mentioned my company pension for this financial year.

I've worked out that my total wage/salary this year will be :
Company Pension :  £10255
State Pension: £5511
Taxable Interest on savings and investments : £12552
Total Taxable Dividend : £2045

So I'm assuming that I get Starting Savings Rate =  17570 - 10255 - 5511 = £1804
Personal Savings Allowance = £1000
This will reduce my Taxable Interest on savings and investments to   12552 - 1804 - 1000 = £9748

Therefore my Income tax on wages  at Basic Rate = ( £10255+ 5511 - 12570) *20% = £639.20
My tax on savings will be = £9748 x 20% = £1949.60
Dividend Tax after tax allowance £500  at 8.75% = £(2045- 500) *8.75%  = £135.19  

Total Tax to Pay HMRC = £639.20 +£1949.60 + £135.19 =£2723.99

Dazed_and_C0nfused

None of the above makes much sense to me because they haven't even mentioned my company pension for this financial year.

Who is this tax code for then? 

You don't mention another PAYE source but it isn't your company pension as you clearly stated that in your comment above. 

Who has the tax code been sent to (they are just told K457, not the breakdown 😉).

I will answer your other points later but you need to remember tax codes are only ever provisional, your actual tax liability is always finalised after the end of the tax year.  Sometimes you will have paid roughly the correct amount and nothing else needs doing.  Other times people complete a tax return or HMRC send a calculation detailing the tax underpaid.  Or overpaid.

Dazed_and_C0nfused

The dividend tax deduction is, in theory, so the basic rate tax can be paid on your (estimated) dividend income.

As you have no spare Personal Allowance the £2,045 dividend income will be taxed like this,

£500 x 0% = £0.00
£1,545 x 8.75% = £135.18

The dividend tax deduction of £675 will mean whoever the tax code has been sent to would, in theory, deduct 20% tax from an extra £675 of your pension income.  £675 x 20% = £135

Dazed_and_C0nfused

Estimated tax you owe this year £6711

That makes no sense.  Are you certain you haven't misunderstood your tax code and that the £6,711 isn't a tax code deduction to collect a much smaller amount of estimated tax you owe for the current tax year??

Dazed_and_C0nfused

I've worked out that my total wage/salary this year will be :
Company Pension : £10255
State Pension: £5511
Taxable Interest on savings and investments : £12552
Total Taxable Dividend : £2045

Have you told HMRC that you expect to receive £12,552 in untaxed interest in the current tax year?  If not then they will just be using the figures from 2023-24 as the estimate for the current tax year.

That is perfectly normal and you don't need to provide your own estimate.  You can do if you wish but you don't have to.

HUMBUG

Dazed_and_C0nfused said:

Estimated tax you owe this year £6711

That makes no sense.  Are you certain you haven't misunderstood your tax code and that the £6,711 isn't a tax code deduction to collect a much smaller amount of estimated tax you owe for the current tax year??

Apologies - yes they have mentioned that my 'Company Pension' will only be sent the tax code .

The previous tax code was K1140X  and now they've changed it to K457X 

I haven't got a clue where they got the first estimate £11521  and now changed it to £6711.  I sent them a letter several weeks ago to provide a detailed explanation for the £11521 but they haven't replied back yet. Now they've changed their estimate again which has caused even more confusion.