Taxable dividend and interest income below the threshold for a self assessment tax return – the process clarified

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The criteria for filing a self assessment tax return been updated and for 2016/17 a return is required where:

  • your income from savings or investments was £10,000 or more before tax
  • your income from share dividends was £10,000 or more before tax

According to ICAEW, it begs the question about the process for those who have income from dividends and or interest which is below these limits but on which tax is due (eg, because the income exceeds the personal savings allowance/dividend nil rate band). The information on gov.uk is incomplete on this point.

Untaxed income below the thresholds for self assessment must be reported to HMRC by phoning the HMRC contact centre or the agent line.

Where possible HMRC will collect the tax due on this income by making an adjustment to the taxpayer’s PAYE tax code. Where this is not possible (because there is no source of income liable to PAYE, or the PAYE income is insufficient to take the adjustment) HMRC will put the taxpayer into self assessment and issue a tax return.

HMRC generally carries tax code adjustments for interest and dividends forward to subsequent tax years; in such cases it will be important to monitor tax codes and to notify HMRC if the amount of income changes.