What Dividends Should I Put in my Self Assessment? - Our Guide
Operating a business via a limited company means you will likely receive compensation via a salary and dividends. If you have any other untaxed income upon which dividend tax is due— like tips and commission, foreign income, or money from renting out a property—you have to complete a self-assessment tax return. Use this article to guide you on what dividends you are required to report.
What Is the Self-Assessment Tax Return?
The Self-Assessment Tax Return is the official return to HM Revenue and Customs (HMRC) and is used to collect income tax. It is where all income is declared, and taxes and tax adjustments are calculated. While many systems are designed to collect tax, completing a self-assessment and recording all of your income is the best way to ensure you have paid the right amount of tax in the tax year.
How Are Dividends Taxed?
If you own shares in a company, you may get a dividend payment. You may also receive a dividend allowance yearly. Keep in mind that you don’t pay tax on any dividend income under your Personal Allowance, which refers to the amount of income you can earn annually without paying tax. In addition, you only pay tax on dividend income above the dividend allowance.
What Dividends Do I Put On My Self Assessment?
Dividends from your limited company are reported in the Company Accounts and declared throughout the company’s financial year. Generally, this year is set by Companies house at the end of the month in which your company was established.
How Do I Align the Dividends to the Self Assessment Tax Year?
Remember that the company accounting year won’t necessarily align with the Self Assessment tax year. For instance, the last tax year started on April 6, 2020, and ended on April 5, 2021. If you made late payments, you would usually pay the penalty.
The only way to align your dividends to the self-assessment tax year is to work out what will go on self-assessment based on the date the dividend was declared and taken. If you need help with this, consider seeking accountancy services for limited companies.
Do I Have to Keep By Bookkeeping up-to-Date?
Keeping your books up-to-date is essential because it shows the exact amount of money you make from the limited company. Doing this prevents you from making an illegal dividend that could cause problems in the future. It also makes it easier to see the necessary figures for self-assessment.
What Should I Do If I Took Random Amounts from the Company Bank Account?
If you have taken random amounts from the company bank account without reference to salary, dividends, and expenses, you have to sort this out as soon as possible. Start by recording the amounts taken in chronological order and subtracting any expenses, salary, and necessary dividend transactions. This will eliminate the “Director’s Account” balance. Consult accountancy services for businesses so you can maintain accurate records.
Conclusion
If you have untaxed income, you are required to complete a self-assessment tax return. While it can be complicated, fortunately, you now have a better idea of what dividends you have to put on your self-assessment. If you are still unsure and need further guidance on how to go about this, work with experienced accountants like us.
Have an easier time paying self-assessment tax bills by teaming up with 1to1 Accountants. Our accountancy firm leverages technology, establishes long-term relationships, and offers honest expert advice to serve small businesses and freelancers in England. Schedule a no-obligation consultation today!
