HMRC letter about dividends
- Michael Roberts FPFS
- Oct 20
- 3 min read
Some of our clients – especially those with General Investment Accounts (GIAs) or individual shareholdings – may have recently received letters from HMRC. These are part of a campaign encouraging people to double-check their Self Assessment tax returns for dividend income.
If this sounds familiar, here’s what’s going on – and what you need to do.
What’s changed?
In recent years, the annual tax-free dividend allowance has reduced quite significantly. When it was introduced in 2016, the allowance was £5,000 pa. This meant that each year you could receive up to £5,000 of dividends with no tax due. This has been whittled away over recent years, and the allowance now stands at just £500 pa. As of the 2023/24 tax year, the allowance dropped to £1,000 – and it’s fallen further since. This means more people are now liable to pay tax on dividend income, even if they haven’t in the past.
HMRC is aware that some investors may not realise they’ve crossed the new lower threshold, especially if they hold shares outside of tax wrappers like ISAs or pensions. The letter isn’t part of a formal investigation, but a reminder to check your return and make any corrections if needed.
What counts as dividend income?
If you hold shares or funds, either through a GIA or directly (outside of an ISA or pension), you may receive dividends. These are usually paid quarterly or annually, and you should receive a dividend voucher showing how much was paid. It's important to note that even if the dividend is reinvested (ie you don't actually receive the cash in the bank), it is still taxable.
Example
Let’s say you held a GIA with a few UK equity funds, and received £1,500 in dividends in the 2024/25 tax year. Because the allowance was £1,000 that year, the extra £500 would be taxable – depending on your income tax band, that could mean £43.75 or more to pay. Not huge, but it still needs to be disclosed.
What should you do?
If you’ve received a letter from HMRC:
Check your tax return – Have all your dividend payments been included?
Amend your return if you spot an error – You can do this online or in writing until 31 January 2026.
Keep your records – Dividend vouchers or broker statements are usually sufficient.
Speak to your adviser – If you’re not sure whether this affects you, we’re here to help. We can provide duplicate copies of the tax pack giving details of the income received for any investments we oversee for you.
HMRC may charge interest or penalties for underpaid tax, but these can often be reduced if you act promptly and helpfully.
It's not just about dividends
Although HMRC's letter refers specifically to dividends, there can also be interest within a GIA that needs to be disclosed. Again the tax pack will show this information.
No letter? Still worth a check
Even if you haven’t been contacted by HMRC, the falling dividend allowance means it’s wise to keep an eye on your GIA or share portfolio. We’re always happy to walk you through what’s taxable and what’s not.
You can download a copy of the letter here:
HMRC helpline
HMRC have set up a helpline to assist with queries. If you need to contact them, you can call on 03000 516640 between 9am and 4pm, Monday to Friday. Please note this support line will close 30th November 2025
We’re here if you need us
We know tax matters can feel complicated – but you don’t have to figure it out alone. Let us know if you’d like to talk anything through.
Best wishes,
Michael Roberts FPFS
Chartered Financial Planner and Director
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