Date posted: 12th Feb 2024
We understand that HMRC have issued a number of “nudge” letters aimed at those that may be undeclaring dividend income. These are sometimes known as “One to Many” letters.
HMRC are comparing company accounts and identifying businesses with a significant drop in reserves. The decrease may indicate that the shareholders have received a dividend distribution from the company and potentially not declared the income on their annual tax returns. There could be other reasons for the decrease in reserves, such as losses, but HMRC should take that information into account, as they are sent a copy of the full accounts with the company tax return.
The HMRC letter states that the individual must check their tax return to make sure all dividend income has been declared and contact them either way. The letter states if you do not respond, they may open a compliance check. This can be quite unnerving for the unrepresented taxpayer and we would advise that professional advice is sought.
It could be that individuals have not declared the dividend income as this is within their dividend allowance. This was £2,000 for 2022/23 but dropped to £1,000 for 2023/24 and will drop to £500 for 2024/25, thus bringing many more taxpayers into the requirement to declare dividend income.
If you need assistance with such a letter from HMRC or have other undeclared income to tell HMRC, it is best to seek our professional advice as there can be significant penalties for under-declaring taxes. Contact us here.
