A taxing calculation
27th June 2017Calculate your own tax…
The introduction of the so-called dividend and savings allowances from April 2016 was intended to reduce the tax liability for taxpayers with modest dividend and interest income, possibly removing them from the need to prepare a tax return altogether.
For other taxpayers however, the interaction of these changes, together with the 0% starting rate band for savings and the personal allowance, makes the correct calculation of your income tax liability far from straightforward in some cases.
HMRC have updated the tax calculation summary notes for 2016/17 (available here), which offer taxpayers a method to calculate their own tax when preparing their tax return.
…but beware of problems.
Related to these tax changes, HMRC were unable to correctly set their computational standards before the start of the tax return season. This means that for taxpayers with certain combinations of income, third party software and HMRC’s own free software may not calculate the correct amount of tax due.
For those using third party software in these cases, it will be necessary to submit the return by post, rather than electronically. This will add further to HMRC’s already bulging mailbag, and result in further delays. For those using HMRC’s own software, it is hoped that HMRC will somehow be able to later correct these calculations.
The cases are included in HMRC’s list of exclusions for 2016/17 (available here), the most common cases being numbers 51, 52 and 56.
Disclaimer - All information in this post was correct at time of writing.
