HMRC has revised the tax calculation summary notes (2017) to help individuals calculate the best way to use their personal tax allowance, including advice on accounting for dividends and residential property income under new rules
The 48-page HMRC guidance includes tips and advice on reporting non-savings income and lump sum payments, dividends and gains on life policies with tax treated as paid and tax due after Gift Aid payments and tax credits on dividends.
There is also a working sheet to help individuals complete the self-assessment tax return supplementary pages SA110 tax calculation summary.
Income Tax Act 2007, section 25(2) (ITA 2007) states that reliefs and allowances (including the personal allowance) should be deducted ‘in the way which will result in the greatest reduction in the taxpayer's liability to income tax’.
Following introduction of the dividend nil rate (dividend allowance) and savings nil rate for basic and higher rate taxpayers (savings allowance) from 2016-17, the greatest reduction may now be obtained by deducting the personal allowance from dividend income in priority to savings or other income.
For taxpayers that want HMRC to handle the calculations, paper tax returns must be filed by 31 October 2017 or online by 31 January 2018 (to file online).
The HMRC tax calculation summary notes 6 April 2016 to 5 April 2017 are available here
The HMRC tax calculation summary form Tax year 6 April 2016 to 5 April 2017 (2016–17) is here