Self Assessment - Dividend Tax - Payments on Account

[oliverson]

The whole thing is a joke.

Dividends are payments that may or may not be made. Who can foresee their company profits with any degree of certainty, particularly in the current market? Any tax paid on dividends should be paid at the end of the tax period AFTER that dividend has been awarded, in a fair world.

HMRC are no better than some junky waiting for their giro to come through so they can get a fix. Talk about living hand to mouth. "lend us a fiver until I get paid would you?".

[AtW]

The whole prepayment thing is a joke... but don't worry, they are fixing it with quarterly tax returns...

[Maslins]

Dividends are payments that may or may not be made. Who can foresee their company profits with any degree of certainty, particularly in the current market? Any tax paid on dividends should be paid at the end of the tax period AFTER that dividend has been awarded, in a fair world.

HMRC are no better than some junky waiting for their giro to come through so they can get a fix. Talk about living hand to mouth. "lend us a fiver until I get paid would you?".

There's a lot wrong in the above comment.

Even when in the payments on account (PoA) regime, you're basically getting 10 months of dividends before you pay any personal tax, so you're not paying tax in advance. As TCP says, you should know 10/12ths of your income before having to pay that PoA, so if at that stage you still have no clue what you'll earn, it suggests your bookkeeping needs work.

You're also in full control of when/how much you take in dividends, so can choose when/how much personal tax to pay.

Plus you pay less than the equivalent employee, who suffers all their income tax before they even get their pay.

[TheCyclingProgrammer]

The whole thing is a joke.

Dividends are payments that may or may not be made. Who can foresee their company profits with any degree of certainty, particularly in the current market? Any tax paid on dividends should be paid at the end of the tax period AFTER that dividend has been awarded, in a fair world.

HMRC want to collect tax as soon as possible - that's why most people are on PAYE and pay tax at the end of every month. In comparison people who pay most of their tax via self-assessment have far preferential treatment.

As things stand, we pay half the estimated tax bill for the year 2 months before it ends and the rest 4 month after it ends. That's not too bad, but as I said before it can be awkward for people with lumpy income who earn more in the second half of the year than the first. But as we can control the timing of our dividend payments, we can largely avoid this issue.