Self-assessment Tax Returns are a pain for the self-employed and increasingly for many modest investors who may not have realised they need to complete one – with many more fines being issued as a result.
A Freedom of Information (FOI) request from City platform AJ Bell notes has found that 3.6million people are due to have to pay dividend tax this tax year, double those from 2021/22. This is worth an extra £18billion to the Chancellor this year alone.
Your relatively modest investments may not even take you over the threshold by very much, but if they do, you will need to complete a return.
What’s more, HMRC has become very, very efficient at issuing fines for non-completion and is very quick to do so too.
It can also add up quickly! If you miss the January 31 Self-Assessment deadline, you’ll be fined £100 for a late return.
You then have 30 days to pay your outstanding tax before 5% is charged on it. You have 90 days to get your return in, after which it will cost you £10 a day in fines.
The latest FOI data available following an AJ Bell enquiry is that just under 1.6million taxpayers received fines or penalties for their self-assessment tax return in the 2021/22 financial year.
The Dividend Tax threshold for the 2023-24 tax year is £1,000 and for 2024-25 it will be just £500, so you can see how easily it could be to get caught out.
As we have said many times, it is the ignominy of having to file a Return that is worst for most people, though we are on hand to help people if they wish to appoint us and for a very competitive cost.
Remember too, people will be caught with interest at the bank, Building Society and National Savings as well – not just dividends, as the limits for tax-free income have all been savaged.
You do want to file a Return if you are liable – don’t wait for the penalties when HMRC contacts you in a year or two, as it does receive the information!
The tax system can be incredibly confusing if you’re not used to it, so do consider contacting us or a suitable finance professional if you are unsure.
In related news, watch-out too for what the Chancellor might do in the Budget – some changes may be immediate (Capital Gains Tax perhaps?) and some deferred till 6/4/25.
But you can be sure, there will be some nasty hits to those with capital of any form and on Inheritance Tax rules and allowances too, possibly even restrictions on what you can put into ISAs and Pensions as well, so don’t delay action if that may affect you.
This is hot on the heels of the latest announcement of very high public borrowing for July, principally to fund the enormous public sector salaries and pensions and also increased welfare payments.
Not to mention that as many as 25% more estates were paying Inheritance Tax this year than last and that’s before the allowances were reduced.
