HMRC letter re Tax Code

[Bluebird]

Just had a letter from HMRC saying my tax code for 2016-17 is 418L

The detail states:

Personal Allowance = £11k
Less dividend tax £6816
Total tax free amount = 4184


Where did they get the 6816 from?

Is it just an estimate?

Last year I paid myself £27 in dividends.

[jamesbrown]

Just had a letter from HMRC saying my tax code for 2016-17 is 418L

The detail states:

Personal Allowance = £11k
Less dividend tax £6816
Total tax free amount = 4184


Where did they get the 6816 from?

Is it just an estimate?

Last year I paid myself £27 in dividends.

Yes, it's nonsense. Yes, they have a history of computing nonsensical tax codes. You can state on your SATR that you don't want them to fiddle around with your tax code. Even then, they might do so. If you search here, you'll find many similar cases with the forthcoming changes to dividend taxation. They want to get their hands on the money as quickly as possible, rather than waiting for a balancing payment on account. Simply call and ask them to reinstate a normal tax code, so you can handle this through balancing payments on account once your SATR has been submitted.

[SimonMac]

http://forums.contractoruk.com/accou...de-change.html

http://forums.contractoruk.com/accou...aye-codes.html

[northernladuk]

HMRC Grabbing Dividend Tax Earlier - Contractor Weekly

[TheCyclingProgrammer]

tax due on dividend income for 2016/17 is not due for payment until 31st January 2018

Well that's only partially true...if its your first year in self assessment this is the case but otherwise you should be making payments on account based on a reasonable estimate of your earnings which would be due in Jan 2017 and July 2017 with just a balancing payment due in Jan 2018.

[ContrataxLtd]

Well that's only partially true...if its your first year in self assessment this is the case but otherwise you should be making payments on account based on a reasonable estimate of your earnings which would be due in Jan 2017 and July 2017 with just a balancing payment due in Jan 2018.

Hi TCP

If we are being really pedantic you would only have to make payments on account against 2016/17 if your liability for 2015/16 was greater than £1,000 and less than 80% of the liability had been collected at source (i.e. PAYE).

If, like a lot of contractors, you restrict your income for 2015/16 to the high rate threshold there probably wouldn't be any liability and therefore no payments on account to make. This would then mean that the tax for 2016/17 would be due in one balancing payment by 31st January 2018 with payments on account against 2017/18 due 31st January 2018 & 31st July 2018 also.

Martin
Contratax Ltd

[ASB]

Yes, it's nonsense. Yes, they have a history of computing nonsensical tax codes. You can state on your SATR that you don't want them to fiddle around with your tax code. Even then, they might do so. If you search here, you'll find many similar cases with the forthcoming changes to dividend taxation. They want to get their hands on the money as quickly as possible, rather than waiting for a balancing payment on account. Simply call and ask them to reinstate a normal tax code, so you can handle this through balancing payments on account once your SATR has been submitted.

I just wonder.....

If one were to "appeal" it back to zero on the grounds of it not being expected to be due whether they will charge interest from the payment on account date if it turns out to eventually be due (like they do with payments on account if they are appealed down to zero).

I don't expect they will initially until the first set of tweaks. But the dividend tax is as much about getting it earlier (for than one off receipt) as it is about getting more tax.

[ContrataxLtd]

I just wonder.....

If one were to "appeal" it back to zero on the grounds of it not being expected to be due whether they will charge interest from the payment on account date if it turns out to eventually be due (like they do with payments on account if they are appealed down to zero).

I don't expect they will initially until the first set of tweaks. But the dividend tax is as much about getting it earlier (for than one off receipt) as it is about getting more tax.

As far as I'm aware there isn't currently any mechanism to charge interest on tax not collected by a tax code in relation to tax to dividends and I can't see this ever applying as the tax is only due under self assessment and not the PAYE system.

You shouldn't have to 'appeal' it on the basis of not being due either, HMRC have no actual right to collect tax on other income via your tax code if you complete a self assessment they only do it to supposedly make it easier for the tax payer (read getting tax sooner for HMRC).

Martin
Contratax Ltd

[ASB]

As far as I'm aware there isn't currently any mechanism to charge interest on tax not collected by a tax code in relation to tax to dividends and I can't see this ever applying as the tax is only due under self assessment and not the PAYE system.

I thought they did. In as much as if a payment on account was due and had been reduced to zero by taxpayer request then interest was due. I'm sure I read that in the sa notes somewhere. But can't find it so probably misremembering.

All I can find is potential penalty if your request to reduce is made unreasonable.

EM4660 - Penalties: Claims to Reduce Payments on Account

[TheCyclingProgrammer]

I thought they did. In as much as if a payment on account was due and had been reduced to zero by taxpayer request then interest was due. I'm sure I read that in the sa notes somewhere. But can't find it so probably misremembering.

All I can find is potential penalty if your request to reduce is made unreasonable.

EM4660 - Penalties: Claims to Reduce Payments on Account

I think what Contratax means they can't charge you interest for not collecting tax through your tax code, only if you reduce your payments on account by too much.