Changes in legislation mean that an increasing number of people will need to enter the self- assessment income tax system.
DY’s Sarah Crane warns:
“The changes are expected to affect at least 3,235,000 individuals in the year 2023 to 2024, and 4,405,000 individuals in the year 2024 to 2025.
“One example of those affected will be individuals who hold share investment portfolios, generating dividend income and capital gains in the course of their trading on the market.”
Sarah said in the 2022 Autumn Budget, the Chancellor announced that the £2,000 nil-rate band for dividend income would be reduced to £1,000 from 6 April this year, and reduced further to £500 from 6 April 2024.
“This means that individuals who receive dividends above £1,000 for the year to 5 April 2024 will have an income tax liability to report and settle by 31 January 2025.
“From 6 April 2024 dividends above £500 will give rise to an income tax liability, with the same implications.”
Sarah said anyone affected by the changes will have to register with HM Revenue and Customs for the self-assessment scheme by 5 October, following the tax year in question.
“There is also a reduction of the capital gains tax exemption for individuals from £12,300 to £6,000 from April 2023, and then it will be halved to £3,000 from April 2024.”
Sarah also had a warning for savers who may also find themselves affected by the change in legislation.
“As interest rates have been on the rise, savers should be aware of the level of return they receive on their savings. Currently, a typical saver receiving non-savings income between £17,570 and £50,270 can earn up to £1,000 tax-free. But anyone with income over the basic rate band (£50,270) is limited to only £500 of tax-free interest.
“At the moment, savings rates in excess of 5% are available to individuals, so a higher rate tax payer with savings of £10,000 invested would earn above the £500, and so would have to report the additional liability and pay the appropriate amount of tax to HMRC.”
DY’s Sarah Crane