HMRC is taking a tougher stance on undeclared dividend income by cross-referencing company records with self-assessment tax returns. The goal? To identify individuals, especially directors and shareholders, who may be under-reporting what they receive from their companies.
This latest move is part of HMRC’s wider strategy to close the tax gap by using data more effectively, and it could impact thousands of small business owners and company directors in the UK.
Dividend income must be declared as part of an individual’s self-assessment tax return. However, HMRC suspects a significant number of individuals either omit this income or understate it. Using its powerful data-matching tools, HMRC can now compare Companies House filings and corporation tax returns with personal tax submissions.
If there’s a discrepancy, say, if a company has declared dividend distributions that its shareholders haven’t reported, HMRC is likely to raise an enquiry or issue a nudge letter.
As the 31 January deadline for the 2024/25 self-assessment looms, taxpayers are being advised to double-check their dividend records before submitting their returns. Getting it wrong could mean fines, backdated tax bills, and interest charges.
