As discussed in other posts, from 6 April 2016 dividends will attract an additional 7.5% tax on top of taxes previously in place. HMRC have decided to try to collect some of the additional tax due through tax codes which apply to salaries. To do this HMRC will estimate dividends for 2016/17 based on figures two years ago and make relatively complex calculations. This could then lead to PAYE being deducted from salary (of course PAYE can’t be deducted from the actual dividends). Any further dividend tax due (or indeed any repayment if too much has been taken) will be calculated as part of the 2016/17 self assessment tax return.

In our opinion this is unnecessarily complex and inefficient acceleration of the collection of the dividend tax. Ultimately trying to collect dividend tax through PAYE on salary will not result in a single penny additional tax being collected as this is only affects the timing of the tax collection, not the amount.

David Wilsdon