What to do when HMRC sends a dividend income nudge letter
HMRC has recently been sending nudge letters to people who might have missed some dividend income on their 2023–24 tax return. The letter may sound official, but it’s not a penalty notice or investigation. It’s more of a polite reminder, encouraging you to go back over your Self Assessment and make sure your dividend figures are spot on.
Think of it as HMRC giving you a nudge, not a knock. With the technology they use now, they can easily cross-match details from banks, investment platforms, and UK companies, making it simple to spot small errors. So, if there’s a small mismatch — say, a dividend payment you forgot about, their system will likely pick it up. Let’s look at what these letters mean, why they’re being sent, and what you should do if one arrives in your post.
What are dividend income nudge letters?
In simple terms, these letters are alerts from HMRC saying: “We believe you may have dividend income you haven’t told us about.” They’re not formal investigations. Rather, they’re part of a broader compliance drive where HMRC signals to taxpayers that their records may need checking.
For example, if you hold shares in a UK company and dividends are paid out, but your Self Assessment return doesn’t reflect that, HMRC’s data systems may flag it. In some campaigns, they’ve matched company accounts (look for reduced reserves but no declared dividend) to personal tax returns and then issued these letters.
What this means for you: if you receive one of these letters, it doesn’t mean you’ve done something wrong intentionally—it just means it’s time to review your tax return and ensure it’s complete.
Why you might have received one
HMRC’s data-matching has grown more sophisticated. They now pull in information from many sources: company filings, dividend payment records, investment platforms, and more.
Here are a few typical triggers:
- You’re a shareholder in a UK company and dividends were paid, but they don’t appear on your tax return.
- The dividend allowance has been reduced over recent years, so what once might have been overlooked now triggers attention.
- HMRC’s “one-to-many” campaigns target groups of taxpayers based on common traits or patterns in the data.
Receiving this letter doesn’t automatically mean you owe tax—it means HMRC has reason to ask you to check your records.
What you should do before 31 January 2026
If you’ve received the letter, you should deal with it reasonably soon rather than letting it slide. The deadline for amending the 2023-24 tax year is 31 January 2026, but sorting things earlier is always better.
Here’s a simple checklist to follow:
- Check your paperwork – Go through your dividend vouchers, investment statements, and any records from the companies you hold shares in.
- Compare your return – See if the dividend figures on your Self Assessment match what you actually received.
- Decide if you need to act:
- If you find missing dividend income, you’ll need to amend your return or make a disclosure.
- If everything checks out and you’ve declared all your dividends, you’re good to go — just be sure to keep your records filed safely in case HMRC asks for them later.
- Act accordingly: If you spot something missing, update your Self Assessment online or follow the steps in the letter. If you’re already up to date, simply stick to the instructions and relax.
- Keep records: Regardless of the outcome, retain your documentation in case HMRC asks to see it later.
Sorting this early gives you more control and avoids any unexpected issues later.
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What happens if you do nothing
Ignoring the letter is a gamble. The letter itself isn’t a penalty or a formal investigation, but it could lead to one if you fail to respond and there are undeclared amounts.
Possible consequences include:
- HMRC may open a compliance check.
- If undeclared dividends are found, you may owe tax plus interest.
- Penalties may be applied, potentially higher if HMRC believes you were careless or deliberate.
So while the nudge letter is a friendly-toned prompt, ignoring it can lead to much less friendly outcomes.
How to get ahead of penalties
There is a silver lining: HMRC is more forgiving if you act quickly, honestly, and transparently. Being proactive will generally reduce any penalty exposure.
Here’s how to do it:
- Notify HMRC early if you find the mistake. Don’t wait.
- Be clear and open about what happened—explain how the error occurred and show your records.
- Fix the return and pay what’s due as soon as possible. The quicker you act, the better you’ll be viewed.
By following these steps, you might limit the penalty or avoid it altogether.
Should you get professional advice?
If your situation involves multiple years, company dividends, complex share structures or if you’re just unsure, bringing in an accountant or tax adviser can be a very wise move. Professional help brings a number of benefits:
- They’ll review your paperwork and ensure nothing is overlooked.
- They can guide you through the correct amendment or disclosure route.
- They’ll support you in communicating with HMRC, if needed.
- They’ll help put procedures in place so you don’t end up in the same position next year.
In short, the cost of advice may well be less than the cost of getting things wrong.
Final thoughts
Getting a nudge letter from HMRC about your dividend income might feel worrying—but it’s actually a chance; a chance to check that your tax affairs are in order, make any corrections while you’re in control, and reduce the risk of larger issues later.
If you’ve received such a letter:
- Treat it promptly.
- Gather your dividends paperwork and review your return.
- Fix anything that needs fixing before 31 January 2026.
- Keep your evidence safe.
- If you’re feeling uncertain, don’t try to figure it out alone — speak to a tax professional.
Taking action early can spare you a lot of frustration down the line and might even save you some money. Need help reviewing your dividends or fixing your return? We can check your dividend figures, deal with HMRC directly, and make sure your tax return is right the first time.
Author
Mukund is a founding member of the Affinity Associates Group and has been with the practice for nearly 40 years. After completing his degree in Accounting and Finance, he went on to qualify with both ACCA and ICAEW in 1991. Over the years, he’s built deep expertise in consultancy, tax, business development, and corporate group structures. Mukund is known for helping clients make sense of complex financial challenges and turning them into opportunities for sustainable growth.
