If you’re struggling to make sense of the new rules about the taxation of savings and dividends, then you are not alone. Even accountants and taxation experts are struggling to get their heads around the changes which many describe as ‘horrendously complex’. Unfortunately, it appears that even HM Revenues & Customs are having problems with the changes too, because its tax computation software has led to errors for thousands of tax payers at the end of the 2016-17 tax year. HM Revenues & Customs has said it will provide a fix for 2017-18 tax returns. Prior to that it has asked those affected to submit paper-based returns.
So what exactly has gone wrong? Well, taxation experts believe the problems were caused by the interaction of the new tax-free allowances for dividends and savings, along with the zero per cent savings rate band. Who has already been affected by these errors? Well, the first group of taxpayers affected were those that didn’t have the zero per cent savings starting rate applied to the first £5,000 of their savings income. Unfortunately, the problems don’t end there: a second group of affected taxpayers stand to lose up to £280 as the HMRC software incorrectly allocates the £5,000 dividend tax allowance so that too many dividends are taxed at the additional rate of 45p.
The news of HMRC’s software problems has prompted criticism from taxation experts, and led to calls for greater HMRC publicity. Joanne Walker, technical officer, the Chartered Institute of Taxation (CIoT), believes it is imperative that the problems be flagged up and highlighted before individuals begin to complete their 2016-17. Ms Walker said it was ‘quite surprising’ that HM Revenues & Customs had not done more to publicise the issue, and she has called on the tax authority to clarify the situation by placing a message on the personal tax accounts of all affected taxpayers.
HMRC has said that the scale of the problem has been exaggerated. An HMRC spokesperson stated that no tax had been incorrectly paid or assessed:
“A very small percentage of self-assessment taxpayers who have an unusual combination of income types have to use paper tax returns.”
“We are constantly improving our online services to make them more comprehensive and user-friendly. Last year, more than 9.5m people successfully submitted tax returns online.”
If you are struggling to understand the new rules on the taxation of savings and dividends, then why not speak to Steven Glicher accountants? Our expert accountants can help you organise your tax affairs and may even be able to suggest ways in which you could potentially make savings. For more information, call Steven Glicher accountants on 0161 485 8007 or email email@example.com.