Student loan deductions, Login for HMRC accounts, Dividends and deceased estates

Employers inevitably have to shoulder the administration burden of payroll deductions, and so it is with student loan repayments. We have an update on the new loan repayment structure effective from April 2016, and additional changes expected later this year. Accessing the HMRC online accounts is becoming more complicated as we explain below. There is also a difficulty with dividends received by estates of deceased persons.  

This is an extract from our topical tax tips newsletter dated 4 August 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
  
Dividends and deceased estates 
All dividends are now taxed in the hands of individuals and trustees at 7.5%, 32.5% or 38.1% depending on the taxpayer's total level of income. This applies to estates of deceased persons as well as to living taxpayers. 

The problem is that estates in administration (and trusts) are not entitled to the dividend allowance of £5000, so all dividends received after 5 April 2016 must be taxed at 7.5% at least. There is no de-minimise amount which can be ignored, as applies to interest received (see our newsletter 5 May 2016). 

When the dividend income received by the estate is distributed to a beneficiary, the cash amount must be grossed up at 7.5% and carry a repayable credit for the tax deducted at that rate. The form R185 (Estate Income) will be revised shortly, but meanwhile Box 18 on the current form may be used to show the position. 
  
The situation is more complicated where the estate has received dividend income in 2015/16 or earlier, and distributes that income in 2016/17 or later. HMRC's current position is that the 10% non-repayable tax credit for earlier years may be used to frank the 7.5% tax due in 2016/17. 
 
This is an extract from our topical tax tips newsletter dated 4 August 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>