Implications of dividend allowance cut on tax

cassiopeia Posts: 66 Likes: 6	Implications of dividend allowance cut on tax Nov 17, 2018 13:47:34 GMT Quote Select Post Deselect Post Link to Post Back to Top Post by cassiopeia on Nov 17, 2018 13:47:34 GMT The ‘dividend allowance’ was cut from £5,000 to £2,000 on 6th April 2018. Would this affect the taxation of P2P loans for the current financial year?
	Last Edit: Nov 17, 2018 13:48:00 GMT by cassiopeia

mason
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Implications of dividend allowance cut on tax Nov 17, 2018 13:50:56 GMT cb25 likes this

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Post by mason on Nov 17, 2018 13:50:56 GMT

Nov 17, 2018 13:47:34 GMT cassiopeia said:

The ‘dividend allowance’ was cut from £5,000 to £2,000 on 6th April 2018. Would this affect the taxation of P2P loans for the current financial year?

P2P loans pay interest, not dividends, so no impact.

ilmoro
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Implications of dividend allowance cut on tax Nov 17, 2018 13:52:44 GMT via mobile

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Post by ilmoro on Nov 17, 2018 13:52:44 GMT

Nov 17, 2018 13:47:34 GMT cassiopeia said:

The ‘dividend allowance’ was cut from £5,000 to £2,000 on 6th April 2018. Would this affect the taxation of P2P loans for the current financial year?

It won't affect the taxation of P2P loans at all as that's income tax. It would affect the taxation of equity crowdfunding platforms like PP.

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hazellend Member of DD Central Posts: 2,363 Likes: 2,180	Implications of dividend allowance cut on tax Nov 17, 2018 15:14:58 GMT via mobile Quote Select Post Deselect Post Link to Post Back to Top Post by hazellend on Nov 17, 2018 15:14:58 GMT I’m in a P2P loan with THC which pays out interest as a dividend once a year. To be fair they tried to change it but not enough holders voted

cassiopeia

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Implications of dividend allowance cut on tax Nov 17, 2018 20:45:34 GMT

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Post by cassiopeia on Nov 17, 2018 20:45:34 GMT

This is an old article from April 2016

www.thisismoney.co.uk/money/article-3525105/How-earn-17k-tax-free-Cash-changes-new-tax-year-including-higher-personal-allowance-new-savings-dividend-rules.html

Indeed it mentions the 5k dividend, but lower down it suggests the 5k allowance is treated as earnings from savings for low earners, so it needn't be a dividend. It gives an example:

If your total income from non- savings earnings — pensions, salary, rental income — is less than £17,000, you can earn another £5,000 from savings without paying any tax.

This is a special tax perk for lower-earners who rely on the interest from their nest eggs. Most of those who will claim this are pensioners.

Say your income from pensions is £15,000 and you earn £3,000 from your savings — a total of £18,000.

You can add the ‘starting rate’ £5,000 to your £11,000 personal allowance before you need to pay tax on your savings.

This gives a £16,000 starting amount for savings tax.

If you add your new £1,000 personal savings allowance, it takes the starting amount for savings tax to £17,000.

Indeed, my HMRC self assessment form tax form automatically assumes a tax free 5k+1k earnings from P2P and bank interest (note nothing to do with dividends) as described above, plus my personal allowance of 11,500 for last tax year = 17,500 tax free. It's the 5k part I'm worried about for next year.

Are there any free tax calculators I can test it on. I'm not sure if the HMRC SA 17/18 one is working yet

Last Edit: Nov 17, 2018 20:50:30 GMT by cassiopeia

r00lish67
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Implications of dividend allowance cut on tax Nov 17, 2018 21:24:01 GMT cassiopeia likes this

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Post by r00lish67 on Nov 17, 2018 21:24:01 GMT

Nov 17, 2018 20:45:34 GMT cassiopeia said:

This is an old article from April 2016

www.thisismoney.co.uk/money/article-3525105/How-earn-17k-tax-free-Cash-changes-new-tax-year-including-higher-personal-allowance-new-savings-dividend-rules.html

Indeed it mentions the 5k dividend, but lower down it suggests the 5k allowance is treated as earnings from savings for low earners, so it needn't be a dividend. It gives an example:

If your total income from non- savings earnings — pensions, salary, rental income — is less than £17,000, you can earn another £5,000 from savings without paying any tax.

This is a special tax perk for lower-earners who rely on the interest from their nest eggs. Most of those who will claim this are pensioners.

Say your income from pensions is £15,000 and you earn £3,000 from your savings — a total of £18,000.

You can add the ‘starting rate’ £5,000 to your £11,000 personal allowance before you need to pay tax on your savings.

This gives a £16,000 starting amount for savings tax.

If you add your new £1,000 personal savings allowance, it takes the starting amount for savings tax to £17,000.

Indeed, my HMRC self assessment form tax form automatically assumes a tax free 5k+1k earnings from P2P and bank interest (note nothing to do with dividends) as described above, plus my personal allowance of 11,500 for last tax year = 17,500 tax free. It's the 5k part I'm worried about for next year.

Are there any free tax calculators I can test it on. I'm not sure if the HMRC SA 17/18 one is working yet

There's two seperate allowances I think you're melding together - £2k which is for dividends, and the £5k starting saving rate for those as you say with very little salary and a decent amount of savings, like pensioners or me. I don't believe the £5k rate is planned to change next year.

I've already done my SA for 17/18, all calculated correctly.

Edit: It doesn't work quite as you've described. The key bit (all described on HMRC here ) is that "Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1."

So in your scenario above, if you have a £15k pension and your personal allowance is £11k, then your starting savings rate is only £1k because you've exceeded your PA by £4k.

So you'd have your PA of £11k, another £1k starting savings rate, and £1k for the personal savings allowance = £13k tax free. So you'll pay liable to pay tax of £18k - £13k * 20% = £1,000.

It is not the most clear of tax allowances, it has to be said!

Last Edit: Nov 17, 2018 21:40:34 GMT by r00lish67

hazellend Member of DD Central Posts: 2,363 Likes: 2,180	Implications of dividend allowance cut on tax Nov 17, 2018 21:48:13 GMT r00lish67 likes this Quote Select Post Deselect Post Link to Post Back to Top Post by hazellend on Nov 17, 2018 21:48:13 GMT The starting rate for savings is extremely generous for those fortunate enough to be able to use it to access the 17k tax free income.

Implications of dividend allowance cut on tax

Post by cassiopeia on Nov 17, 2018 13:47:34 GMT

Post by mason on Nov 17, 2018 13:50:56 GMT

Post by ilmoro on Nov 17, 2018 13:52:44 GMT

Post by hazellend on Nov 17, 2018 15:14:58 GMT

Post by cassiopeia on Nov 17, 2018 20:45:34 GMT

Post by r00lish67 on Nov 17, 2018 21:24:01 GMT

Post by hazellend on Nov 17, 2018 21:48:13 GMT