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22nd September 2017

Beware: Some people who complete an online Tax Return will pay too much tax for the year to April 2017!

Due to an HMRC online error this may overcharge some taxpayers.

Background

For many years individual income tax personal allowances have been offset in the following order:-

  • Non-savings income; then
  • Interest; and finally
  • Dividends

This would normally produce the most favourable (for the taxpayer) tax calculation of the income tax due.

This is no longer the case for 2016/17 self assessment income tax returns. This has been caused by the introduction of the:-

  • personal savings allowance (this can be £1,000, £500 or Nil depending on an individual’s marginal rate of tax); and
  • dividend tax allowance (£5,000 for everyone in 2016/17).

The combination of these has proved too complicated for HMRC’s online system.

It appears that there is a problem (that HMRC are aware of) with the online filing parameters for two specific groups of taxpayers.

 

Is this a problem for you?

Do you fall within either of the following two categories?

  • those with income (including interest) of more than £32,000 and whose non-savings income is between £11,000 and £16,000; and
  • those with non-dividend income of between £27,000 and £32,000 and whose total income (including dividends) is more than £145,000.

 

What To Do

If so, we recommend you file a good old-fashioned paper Return for the tax year 2016/17. The filing date for paper Returns for these categories of tax payers only is being extended from 31 October 2017 to 31 January 2018.

If a Return is filed online for anyone within these two groups of taxpayers it appears there will be difficulties in getting the tax assessment corrected by HMRC.

If you believe that you may fall within one of the two groups of taxpayers who may be adversely affected by this and would like any assistance with the completion of your Tax Return please contact Elaine Morgan on 01604 463120 or click here to email Elaine, who will be happy to assist you.