Dividends - date of record and payout
Discussion
If a stock dividend has a date of record in March 2023 and a date of payout in Late April 2023 (i.e. next tax year)
Which date is used for self assessment - date of record (April 2023 tax year) or date of payout (April 2024 tax year)?
Does it matter if it is a final dividend or an interim dividend?
(Date of Record - date the company checks its records to identify shareholders of the company that are entitled to a dividend.
Date of payout - the date dividend payouts are issued to shareholders - i.e. the date the money actually goes into my bank account.)
Which date is used for self assessment - date of record (April 2023 tax year) or date of payout (April 2024 tax year)?
Does it matter if it is a final dividend or an interim dividend?
(Date of Record - date the company checks its records to identify shareholders of the company that are entitled to a dividend.
Date of payout - the date dividend payouts are issued to shareholders - i.e. the date the money actually goes into my bank account.)
wong said:
If a stock dividend has a date of record in March 2023 and a date of payout in Late April 2023 (i.e. next tax year)
Which date is used for self assessment - date of record (April 2023 tax year) or date of payout (April 2024 tax year)?
Does it matter if it is a final dividend or an interim dividend?
(Date of Record - date the company checks its records to identify shareholders of the company that are entitled to a dividend.
Date of payout - the date dividend payouts are issued to shareholders - i.e. the date the money actually goes into my bank account.)
In this case you would account on a CASH basis, ie receipt date.Which date is used for self assessment - date of record (April 2023 tax year) or date of payout (April 2024 tax year)?
Does it matter if it is a final dividend or an interim dividend?
(Date of Record - date the company checks its records to identify shareholders of the company that are entitled to a dividend.
Date of payout - the date dividend payouts are issued to shareholders - i.e. the date the money actually goes into my bank account.)
Thank you Eric and Adam. That's what I thought, however, my accountant seems to think that if it is a final dividend , it can be " included in the tax return as soon as the company declares you are entitled to the dividend which is the record date". I think I'll ask them if they are sure about that.
As EricMc says, the date that matters for tax purposes is the payment dat.
The so-called "record date" is widely misunderstood. Big, public companies have tens of thousands of shareholders and can't do stuff instantaneously. They need a "record date" which is when they look at the list of shareholders and determine whose bank accounts they will need to send dividends to on the actual dividend payment date.
If you buy or sell a share between the record date and the payment date then it's up to the buyer and seller (through their agents/brokers) to pass on the cash dividend to the right person.
The so-called "record date" is widely misunderstood. Big, public companies have tens of thousands of shareholders and can't do stuff instantaneously. They need a "record date" which is when they look at the list of shareholders and determine whose bank accounts they will need to send dividends to on the actual dividend payment date.
If you buy or sell a share between the record date and the payment date then it's up to the buyer and seller (through their agents/brokers) to pass on the cash dividend to the right person.
Panamax said:
If you buy or sell a share between the record date and the payment date then it's up to the buyer and seller (through their agents/brokers) to pass on the cash dividend to the right person.
Yeah, I know. The share usually drops by a similar amount to the dividend payout immediately after the Record date (cutoff). So if you sold the share the day after the record date , you would still get the dividend payout 1-2 months later , although you no longer own the shares. I've bought and sold shares for over 20 years in Hong Kong. But there is no capital gains tax and dividends don't count as income - they are just not taxed. I've moved to the UK and have seen an accountant (ACCA after her name) for the first time in my life, and they say say I could use the March record date instead of the Late April payout date, which doesn't make sense to me. I'll see them tomorrow and make sure they are certain it is legit. wong said:
... my accountant seems to think that if it is a final dividend , it can be " included in the tax return as soon as the company declares you are entitled to the dividend which is the record date".
There is a clue there, that they might not have proper understanding of this.
The record date is not necessarily the date when the company declares you are entitled to payment.
The company first announces the dividend. At that moment, long-term holders know how much they will receive and also when they will receive the payment.
You obviously need to be holding the shares on the record date, to receive the subsequent payment. Share price is adjusted by the ex-dividend process.
Dividends can be useful, but can also be misleading, because the dividend money paid to shareholders is already owned by those same shareholders. Technically their holding in the company becomes worth a lower amount, because the company is holding less cash after paying the dividend.
Understanding that seems to be beyond some people, who decry companies paying dividends to shareholders.
Tax charged on money you already own. Nearly as good as VAT being charged on fuel duty. A tax on tax.
Edited by Jon39 on Thursday 14th September 11:48
Jon39 said:
There is a clue there, that they might not have proper understanding of this.
The record date is not necessarily the date when the company declares you are entitled to payment.
Yes, the company "declares" the forthcoming dividend in an official announcement to the stock exchange and the press. That announcement contains three key pieces of information,The record date is not necessarily the date when the company declares you are entitled to payment.
- The amount of the dividend per share,
- The record date, which will be a date between declaration of the dividend and payment of the dividend, and
- The actual date the dividend will be paid.
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