This article has been provided by Alan McCann (DTE) Head of Tax Dispute Resolution
HMRC’s own database software contains errors for 2016-17, which in turn has been replicated by all commercial software, because in order to get the returns to file electronically, suppliers must pass the HMRC flags including those which are incorrect.
The problems stem from the interaction between the separate allowances for savings and dividends, the personal allowance and the additional rate tax on income over £150,000. The two groups of taxpayers affected appear to be:-
- Those with total income made up of savings and non savings income over £32,000 of which the non savings income is between £11,000 and £16,000.
- Those with non dividend income of £27,000 to £32,000 plus dividends which take their total income to more than £145,000.
Individual taxpayers (not trustees or personal representatives) are entitled to the dividend allowance of £5,000, which taxes the first £5,000 of dividends at 0% within the tax band the dividends fall into. Dividends are taxed as the highest slice of income.
Paper returns will be required to ensure that the tax calculation is correct. The filing deadline for paper returns in these circumstances will be extended to 31 January 2018, although the original signed paper return will be required.