Hundreds of thousands of taxpayers, including many pensioners, could end up being penalised for failing to report their dividend incomes for the past financial year because they have been told they do not have to fill in a tax return.
If they fail to meet the deadline for revealing unreported income, they could face penalties of 100 per cent of any tax due.
Mike Warburton, a former tax accountant, says that the failure of HM Revenue & Customs to update its advice about who needs to fill in a tax return means that many shareholders are falling through a gap in the system.
Until the tax year 2016-17, dividends were paid after deduction of basic-rate tax at source. Now basic-rate taxpayers who receive dividends of more than £2,000 are liable to pay the 7.5 per cent dividend tax themselves. HMRC said there was “discretion” over penalties and “we don’t rush to enforce them”.