The Lemon Fool

Tax year 2021/22 was the first year, in a while, that I didn't have taxable dividends to declare on my tax return, all good !!

I have received a letter saying that I will not be required to submit a tax return in future tax years, presumably because everything is PAYE or tax exempt.

The Scottish Tax coding system isn't too straight forward, to say the least, and submitting my annual return on line gave me confidence that the calculation of tax deducted was accurate. The online process wasn't too onerous and an online return would give me auditable record in future years.

Would you recommend that I should continue to submit an online return as normal in order check my Scottish tax calculation. The letter, surprisingly, does say that I need to re-register for Self Assessment.

Have any of you guys gone through a similar process? I will be 70 years old this year, if this is relevant.

Thanks in advance
Scotview

If you can (ie are allowed/able to) then I would submit a return for a year or two just to satisfy yourself that the PAYE system is working as it should.

I pay very little tax and none of it is deducted at source so I submit a return annually but it is getting increasingly easier as most of my investment are tax protected (Seeing the valuation this morning shows that they are not protected against a downturn!) It is all automated though so it is not costing the taxman to let you submit a return so in all why not?

Dod

If you don't mind submitting the return in terms of the work required (some find it a hassle), I would carry on submitting the returns for a while. It does give a more definitive statement of your tax situation.

I'm in a similar situation - income from property has ended and will not happen again in the future. However, if bank rates increase during the year, I may be near the savings interest limit. Also, in my head, I don't always have faith that everything will be alright with Gift Aid and SIPP contributions.

I wonder whether we can use the self-assessment website to do the calculations for us, and then just not submit the return if it's within a few pounds (because of the rounding errors). This year, I filled in my self-assessment form to work out how much CGT I had overpaid (I had to guess my total income for the year on the Property Disposal form in December), changed the Property form to get the overpayment back, and then did the self-assessment once the money was in my bank account.

I don't think I was told I would need to re-register though. If I have to do that, I might resort to trusty pen, paper and calculator to work out whether I have paid too little or too much tax.

Loup321 wrote:I wonder whether we can use the self-assessment website to do the calculations for us, and then just not submit the return if it's within a few pounds (because of the rounding errors).

I don't think I was told I would need to re-register though. If I have to do that, I might resort to trusty pen, paper and calculator to work out whether I have paid too little or too much tax.

That raises another interesting question: In your situation can you request a full set of paper returns and use them as a template to calculate the tax yourself, without having to return them to HMRC?

Last time I tried to work out my income tax on a spread sheet myself a few years ago I eventually realised I was no longer able to understand how it worked. So I gave up and relied on HMRC's online offering. It was a few years ago and may at the time have involved HR tax, perhaps I should give it another go as it should be simpler now. It always used to be trivially easy - but that was before The Boy George was let loose on the tax system...

One other plus, if post death your executors find a copy return with all the schedules it will make it easier for them to do your ITR to date of death and will give them a list of your assets that gave rise to taxable income which may assist them establishing your estate. (My Dad covered this with each April making a list of all his assets and attaching it to the copy of his will he kept in the house, but not everyone is that organised ( he was a retired solicitor))

scotview wrote:Tax year 2021/22 was the first year, in a while, that I didn't have taxable dividends to declare on my tax return, all good !!

I have received a letter saying that I will not be required to submit a tax return in future tax years, presumably because everything is PAYE or tax exempt.

The Scottish Tax coding system isn't too straight forward, to say the least, and submitting my annual return on line gave me confidence that the calculation of tax deducted was accurate. The online process wasn't too onerous and an online return would give me auditable record in future years.

Would you recommend that I should continue to submit an online return as normal in order check my Scottish tax calculation. The letter, surprisingly, does say that I need to re-register for Self Assessment.

Have any of you guys gone through a similar process? I will be 70 years old this year, if this is relevant.

Thanks in advance
Scotview

My wife received the letter saying that she was not required to submit a tax return - but various changes in tax on interest and VCTs made it sensible to do so. So they have now put her back on the list requiring a return. I'm still also required to make a return. But in both cases we keep all the numbers for our returns, and it only take a very little effort to plug them into the HMRC online tax return. It also provides a check on our own calculations - which is a lot more complex in Scotland due to the multiplicity of rates and boundaries. In particular the tax reduction for charitable gifts - where there is an interaction between the UK rates and boundaries and the Scottish ones.
What I can't understand is why anyone should gather together all of the relevant data, then hand it over to a Tax accountant, and pay them to enter it on a HMRC form.

scotia wrote:What I can't understand is why anyone should gather together all of the relevant data, then hand it over to a Tax accountant, and pay them to enter it on a HMRC form.

I do that. Partly for the peace of mind of him ensuring everything is correct and complete.

Partly so I don't have to deal with the HMRC website, or even have a HMRC online account.

Partly to save time. For instance I just hand him my consolidated tax certificates and he goes through them. I barely look at them.

That said I agree with you about the value of the discipline of completing and submitting a return, even if technically you do not have to.

scotia wrote:My wife received the letter saying that she was not required to submit a tax return - but various changes in tax on interest and VCTs made it sensible to do so. So they have now put her back on the list requiring a return. I'm still also required to make a return. But in both cases we keep all the numbers for our returns, and it only take a very little effort to plug them into the HMRC online tax return. It also provides a check on our own calculations - which is a lot more complex in Scotland due to the multiplicity of rates and boundaries. In particular the tax reduction for charitable gifts - where there is an interaction between the UK rates and boundaries and the Scottish ones.

What I can't understand is why anyone should gather together all of the relevant data, then hand it over to a Tax accountant, and pay them to enter it on a HMRC form.

It makes no sense to me either. But then, these things frequently seem to have only tenuous links to sense.

If you have Excel, then you can download the tax calculator from Quality Management software: https://www.sa2000.co.uk
I regularly use this to analyse my tax position and to see the impact of, for example, paying more Gift Aid or buying investments that need to appear on the Foreign pages. The calculator is free to use, but if you want to submit directly from it to HMRC then you need to buy a code.

I also was told I didn't need to do a tax return any longer which I simply didn't understand since I still have some untaxed interest and dividends because I haven't got around to spending, gifting or bed-and- isa-ing everything since the dividend allowance was reduced. My interest and dividends were down enormously in 20-21 but how can HMRC know whether you will owe more or less in that case even if they gave you a tax code on the previous year's basis? I ignored their message and tried to do an online return again but came to grief when, after logging on and getting the security code, I was asked further security questions which it was impossible for me to answer, e.g. I no longer have a valid UK passport and I have never had a N. Ireland driving licence. They told me that everyone has do answer these questions but I haven't met anyone else who does. Did any of you? I ended up having to do a paper return and was given extra time after I complained but will probably still be late despite having been up all night.

It looks as though I shall still owe some tax so presumably dividends are not included in the tax code. I wonder what would have happened if I had not bothered to do a return since they said it wasn't necessary. If everyone takes them at their word, HMRC could be losing a lot of tax.

One thing that is holding me up, apart from typing the cgt statements for each disposal, is knowing what to do about special dividends and simultaneous consolidations on the return. I have included the former but do I need to say anything about the latter at this juncture or just remember to include the history if I dispose of them before I die? I suppose I should ask a separate question but am going to have 40 winks and hope to find an answer when I wake.

Bouleversee wrote:I also was told I didn't need to do a tax return any longer which I simply didn't understand since I still have some untaxed interest and dividends because I haven't got around to spending, gifting or bed-and- isa-ing everything since the dividend allowance was reduced. My interest and dividends were down enormously in 20-21 but how can HMRC know whether you will owe more or less in that case even if they gave you a tax code on the previous year's basis? I ignored their message and tried to do an online return again but came to grief when, after logging on and getting the security code, I was asked further security questions which it was impossible for me to answer, e.g. I no longer have a valid UK passport and I have never had a N. Ireland driving licence. They told me that everyone has do answer these questions but I haven't met anyone else who does. Did any of you? I ended up having to do a paper return and was given extra time after I complained but will probably still be late despite having been up all night.

It sounds like you have come a cropper over this: viewtopic.php?p=492158#p492158
(Try to ignore any irritating distractions on the way!)

This was my final summary: viewtopic.php?p=496047#p496047

I don't know if anyone has yet found any solution. (Is it still possible to register with GG via letter?)

Bouleversee wrote:It looks as though I shall still owe some tax so presumably dividends are not included in the tax code.

I'm not quite sure what you mean, but dividends are included in the PAYE code calculation if over the divided allowance.

XFool wrote:

Bouleversee wrote:It looks as though I shall still owe some tax so presumably dividends are not included in the tax code.

I'm not quite sure what you mean, but dividends are included in the PAYE code calculation if over the divided allowance.

I think that should read that dividends are included in with your PAYE code IF you already have a PAYE code.

I pay income tax on dividends but have no PAYE code. Obviously I have to submit a SA return annually. But then I have taxable capital gains annually and so would have to anyway.

Lootman wrote:I'm not quite sure what you mean, but dividends are included in the PAYE code calculation if over the divided allowance.

I think that should read that dividends are included in with your PAYE code IF you already have a PAYE code.

I pay income tax on dividends but have no PAYE code. Obviously I have to submit a SA return annually. But then I have taxable capital gains annually and so would have to anyway.[/quote]

Presumably the dividends that are included are the historical ones, and will be unlikely to be the actual dividends for the current tax year and so some sort of adjustment will still be needed?

Dod

Dod101 wrote:Presumably the dividends that are included are the historical ones, and will be unlikely to be the actual dividends for the current tax year and so some sort of adjustment will still be needed?

Yeah I guess that is all that could be done, so at best an approximation.

But the point I was making is that using the PAYE code to adjust for dividends can only work if that taxpayer has other income that is subject to PAYE, i.e. can be made subject to withholding.

So if you have salary or a non-state pension then you will have a PAYE code. But if all your income is dividends, capital gains, interest, state pension etc. then there is no PAYE code, and so a PAYE code would not help adjust for dividend income.

Lootman wrote:But the point I was making is that using the PAYE code to adjust for dividends can only work if that taxpayer has other income that is subject to PAYE, i.e. can be made subject to withholding.

So if you have salary or a non-state pension then you will have a PAYE code. But if all your income is dividends, capital gains, interest, state pension etc. then there is no PAYE code, and so a PAYE code would not help adjust for dividend income.

Can this be true? State pension is taxable so, if total income above personal tax allowance, it would be taxed - presumably usually via PAYE.

If you do have a non-state pension then all income tax, including any on SP, is taken from that - if on PAYE. Such is my understanding.

Lootman wrote:

Dod101 wrote:Presumably the dividends that are included are the historical ones, and will be unlikely to be the actual dividends for the current tax year and so some sort of adjustment will still be needed?

Yeah I guess that is all that could be done, so at best an approximation.

But the point I was making is that using the PAYE code to adjust for dividends can only work if that taxpayer has other income that is subject to PAYE, i.e. can be made subject to withholding.

So if you have salary or a non-state pension then you will have a PAYE code. But if all your income is dividends, capital gains, interest, state pension etc. then there is no PAYE code, and so a PAYE code would not help adjust for dividend income.

Your final paragraph outlines my position so I have no PAYE code. They occasionally throw up one if I take a one off payment from my SIPP, but it is of course useless.

Dod

XFool wrote:

Lootman wrote:But the point I was making is that using the PAYE code to adjust for dividends can only work if that taxpayer has other income that is subject to PAYE, i.e. can be made subject to withholding.

So if you have salary or a non-state pension then you will have a PAYE code. But if all your income is dividends, capital gains, interest, state pension etc. then there is no PAYE code, and so a PAYE code would not help adjust for dividend income.

Can this be true? State pension is taxable so, if total income above personal tax allowance, it would be taxed - presumably usually via PAYE.

If you do have a non-state pension then all income tax, including any on SP, is taken from that - if on PAYE. Such is my understanding.

You may elect to have the state pension paid gross, with no withholding or PAYE code. I do so and settle any income tax due annually via a SA return. Some people may prefer to handle that via PAYE and that may be possible. But I do not and that is allowed under the rules.

I am not yet drawing on a non-state pension but believe that PAYE does apply in that case. Since I have not had a PAYE code for 20 years, I am not looking forward to that aspect.

XFool wrote:

Lootman wrote:But the point I was making is that using the PAYE code to adjust for dividends can only work if that taxpayer has other income that is subject to PAYE, i.e. can be made subject to withholding.

So if you have salary or a non-state pension then you will have a PAYE code. But if all your income is dividends, capital gains, interest, state pension etc. then there is no PAYE code, and so a PAYE code would not help adjust for dividend income.

Can this be true? State pension is taxable so, if total income above personal tax allowance, it would be taxed - presumably usually via PAYE.

If you do have a non-state pension then all income tax, including any on SP, is taken from that - if on PAYE. Such is my understanding.

No. Lootman is correct. My State Pension is paid gross (they all are I think) and for me to pay any tax due I need to do a self assessment and pay the tax the following January for tax due to the previous 5 April. Quite a good deal really. I pay very little tax because most of my dividends are paid from my ISAs. CGT is sometimes due and if I take anything from my SIPP I sometimes need to pay tax on that. I have no pension other than the SP.

Dod

Dod101 wrote:

XFool wrote:

Lootman wrote:So if you have salary or a non-state pension then you will have a PAYE code. But if all your income is dividends, capital gains, interest, state pension etc. then there is no PAYE code, and so a PAYE code would not help adjust for dividend income.

Can this be true? State pension is taxable so, if total income above personal tax allowance, it would be taxed - presumably usually via PAYE.

If you do have a non-state pension then all income tax, including any on SP, is taken from that - if on PAYE. Such is my understanding.

No. Lootman is correct. My State Pension is paid gross (they all are I think) and for me to pay any tax due I need to do a self assessment and pay the tax the following January for tax due to the previous 5 April.

Indeed it seems so: https://www.gov.uk/tax-on-pension/how-your-tax-is-paid

If the State Pension is your only income
You’re responsible for paying any tax you owe. Fill in and send a Self Assessment tax return if you owe anything.

I must be remembering how things were before The Boy George got his hands on them.