Tax calculations for 2016-17

The latest changes to the way income is taxed has even beaten HMRC’s computer programmers. You are allowed to allocate your personal tax allowance in the way that gives the least tax liability. However, HMRC will reject tax returns which seek to offset the personal allowance against dividend income in preference to other sources. This can cost you up to an extra £625 in tax if not done in the manner best for you. HMRC’s solution is to ask for a paper tax return to be submitted. Areas to be wary of are where the salary is around the basic rate band with dividends or savings income and also where there is low non-savings income or trade losses.

This does confirm that tax-simplification is required if even HMRC cannot get the sums right!