HMRC’s ‘One to Many’ Campaign – Targeting Undeclared Dividend

HMRC are now issuing letters to business owners under a ‘One to Many’ Letter campaign to target undeclared dividends payments.

HMRC have been looking at company reserves and have noted that some are reducing but no dividends are being declared indicating that taxpayers may not be disclosing dividend payments properly.

Dividend income is not taxed at source and therefore it is the individual’s responsibility to declare dividend income in their self -assessment tax return to HMRC to pay the correct income tax liability.

The campaign involves the following –

• HMRC writes to company owners letting them know they may have dividend income to declare.
• The letter asks the owner to disclose information on dividends and likewise to let HMRC know they do not have any undisclosed dividends to declare.
• 30 days will be given from date letter was issued to inform HMRC of any undisclosed dividends.
• Online disclosure facility exists for individuals to report anything due, and individuals will be posted a payment reference number (PRN).
• After PRN is received the owner has 90 days to make payment and after this HMRC can open a compliance check whereby higher penalties will be due if undeclared dividends exist.

Changes to Dividend Tax

• As it currently stands an individual is entitled to £1,000 dividend income tax free.
• As of April 2024, the dividend tax free allowance is being cut down to £500, which means any dividend income earned above £500 will be liable to tax.
• The change in dividend tax free allowance will cause an increase in taxable dividend income and therefore individuals that do not currently pay dividend tax may be liable to pay tax.
• The tax band applied to dividend income depends on the bands applied to other taxable income and therefore it is important to receive proper advice on which rates applies to your dividend income to ensure you pay the correct amount of tax.
• It should be noted that dividend income generated within an ISA remains tax free.

How can AAB help?

As HMRC make efforts to ensure that individuals declare dividends by issuing letters and imposing penalties on incorrect declarations it is important that your dividend income is reported accurately to HMRC. Additionally, as changes are brought in it is important to seek tax compliance advice to ensure you are complying with and making the correct submissions to HMRC.

At AAB our highly experienced team can advise and prepare your submissions to HMRC taking off the pressure and ensuring you avoid any penalties from HMRC as a result of making the incorrect submissions.   Furthermore, should you receive a letter from HMRC asking you to declare dividends we are here to advise you and take you through the next steps.

If you need any assistance or have any questions, please feel free to get in touch with Gillian Rushton, Rachael Denham or your usual AAB contact.