HMRC has announced a major shift in tax procedures, exempting high earners with PAYE income exceeding £150,000 from self-assessment tax returns starting in the 2024/25 tax year.
This change, following the recent threshold increase from £100,000 to £150,000 for 2023/24, is expected to benefit approximately 338,000 taxpayers.
While this move appears to streamline the process, caution is advised. Individuals with additional income, such as dividends, savings interest, or rental income, are still obligated to file annual returns.
Furthermore, the Association of Taxation Technicians (ATT) has raised concerns about the reduction in tax returns, potentially increasing penalties and straining HMRC’s customer service.
Jon Stride, vice chair of the ATT technical steering group, said:
“From April, if you have dividend income of more than £500, you will have tax to pay on that income if you’re an employee earning more than the personal allowance.
“Holding a few shares here and there is not unusual, and dividend information is not readily available to HMRC, so taxpayers will need to remember to contact HMRC to declare this type of additional income and arrange to pay tax on it.”
Stride also warned:
“In a time of high interest rates, plenty of employees could find themselves with tax to pay on their savings. At current interest rates, savings of £10,000 which aren’t held in an ISA could easily give rise to a tax liability for a higher rate taxpayer.”
Changes to the dividend allowance also open up risks of tax liability.
ATT said that reducing tax returns would not benefit HMRC, and if anything, it would put more pressure on HMRC’s already stretched customer service staff.
Amend your PAYE codes
PAYE codes can be amended to ensure tax codes are correct, but this requires interaction with HMRC, defeating the goal of reducing calls to HMRC.
Stride voiced concern at the lack of consultation::
“As was the case with the rule change on self-assessment announced in June, there was no consultation of these proposals. We worry the changes may have been introduced primarily as a cost-saving measure without consideration of the wider impacts.”
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