A new dividend tax comes into effect from 6 April 2016 and it appears that HMRC are using this as another way to try to get some more tax paid in advance with the use of PAYE codes.
We have already seen a number of tax codes from HMRC where an estimated dividend tax amount has been included to work out the code.
The deduction in the PAYE code is labelled ‘dividend tax’ and the notes say that it is to collect the basic rate of tax due on your dividend income, or higher rate depending on the tax band that you fall into.
As the dividends will not be taxed at the basic rate of tax, 20%, in 2016/17 it will be 7.5%, the calculation to get back to the dividend amount to be included is quite complicated and the amounts on the PAYE code are confusing.
If you do receive one and do not want to pay the tax on these estimated dividends monthly, or would like us to check that the code is correct, then please let us know as soon as possible so that we can help getting this removed or amended. You do have a choice so if you would rather pay the tax as one amount in January 2018 then it can be removed from your code.
Please do get in touch if you are affected by the above, contact our Senior Tax Manager, Steve Tobin, on 0151 649 3900 or email email@example.com.