Sometimes it can be very hard to understand what the current Government’s strategy is in relation to HMRC and the services it is expected to provide to the wider tax paying public.
At a time when HMRC is overloaded with rolling out its digital services across the UK and frankly struggling to keep the tax system of a G7 country going, along comes a series of further tax increases aimed at individual taxpayers (we will not address the increases aimed at companies in this blog) which could add a further million or so ‘customers’ wanting to ‘engage’ with the already over-stretched staff at HMRC offices across the UK
Below are examples of what is in store for tax year 2023/24 which started on 6 April 2023:
We have come a long way since the introduction of the Dividend Tax allowance which started off at £5,000 pa back in 2016.
From April 2023 it is going to be cut from £2,000 to just £1,000 and if that was not enough, it will be reduced again from April 2024 to just £500 (you know where we go next when a tax allowance reaches this low level)
What does this mean for those who receive in excess of £1,000 via dividends in current tax year?
You will need to assess whether you are liable for Dividend Tax and make sure you register for Self-Assessment Tax Returns in 2023/24 (if not already registered).
We do not recommend that you attempt to call the HMRC Helpline on this query, the onus is on you to determine your status for 2023/24 but make sure you get it right as it is deemed your taxpayer responsibility!
We can already see a multitude of more elderly, less tech savvy individuals who have kept all their 1980’s privatisation shares (in their own names usually) producing dividends of more than £1k pa, it will be time for them to join the great digital tax revolution, bet they can’t wait!
Capital Gains Tax
Similar to the Dividend Tax Allowance HMRC are now also reducing what is called the ‘annual exempt amount’ to just £6,000 for the tax year just started. For Trustees it will be half that at just £3,000.
We can see Wealth Managers showing concern now as historically they will have kept their clients’ capital gains within these amounts for fear of incurring an actual charge to Capital Gains Tax (‘if only’, some may say after the last 18 months of poor stockmarket performance);
On the positive side our Prime Minster will now have to pay a bit more tax each year (to be precise just £1,260) so that’s good!
What does this mean for those who receive in excess of £6,000 in capital gains in current tax year?
You guessed it:
You will need to assess whether you are liable for Capital Gains Tax and make sure you register for Self-Assessment Tax Returns in 2023/24 (if not already registered).
Once again the elderly and less tech savvy amongst us will struggle here, have you seen the Self-Assessment Capital Gains Tax pages (SA108) and supporting help sheet recently? These 20 or so pages have flummoxed some of the more seasoned Tax Advisers so how is Mrs Smith who realised a gain of £6,005 on the sale of her cryptocurrency going to report it easily?
What would I have done if I was this year’s Chancellor?
For a start, loading potentially more ‘customers’ onto the already full Self-Assessment Tax Return ‘merry go round’ is a BIG mistake; the whole system is creaking and more digital to collect what could be relatively small amounts of Dividend Tax and Capital Gains Tax is not the answer. The professional fees for helping the elderly and vulnerable clients could be more than the actual tax liabilities concerned.
I would have abolished Capital Gains Tax for any asset sales held more than 10 years – ie long term shareholdings or rental properties subject to a sale proceeds cap of say £200k a year, that way HMRC can focus on the more meaningful taxpayers selling more significant assets and leave Mrs Smith to have a dabble in the latest Bitcoin without fear of upsetting HMRC.
On a more serious note, if you feel you are likely to be impacted by these more stringent HMRC reporting requirements on either Dividend Tax or Capital Gains Tax please feel free to contact me on: firstname.lastname@example.org or 07540 113 289