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A rough guide, not to be relied on:
HM Inland Revenue take 10% before you receive your cheque. If adding the gross dividends to your other income the total balance is less then the higher rate threshold there is no further tax to pay on your dividend income. If you are a higher rate tax payer you need to pay an extra 22.5% to the Revenue.
DAZ
Call the Inland Revenue if you are unsure. With a query like this they are usually helpful if you are upfront with them.
Edited to say yes add it to your self assessment form.
>> Edited by dazren (moderator) on Wednesday 16th July 23:00
HM Inland Revenue take 10% before you receive your cheque. If adding the gross dividends to your other income the total balance is less then the higher rate threshold there is no further tax to pay on your dividend income. If you are a higher rate tax payer you need to pay an extra 22.5% to the Revenue.
DAZ
Call the Inland Revenue if you are unsure. With a query like this they are usually helpful if you are upfront with them.
Edited to say yes add it to your self assessment form.
>> Edited by dazren (moderator) on Wednesday 16th July 23:00
When you receive a dividend, the dividend voucher shows that tax at 10% has been deducted. For example - a Net Dividend of £900 equates to a Gross Dividend of £1,000 and Tax of £100. Simple - except for the fact that no tax at any time goes to the Inland Revenue. The tax shown is in fact referred to as Notional Tax i.e. it does not exist.
However, when you are completing your Self Assessment tax return, you must show the Gross Dividend of £1,000 and the Notional Tax Credit of £100. The Gross Amount is added to your overall income to arrive at your Total Taxable Income. If your total taxaable income is not enough to take you into the Higher Tax Bracket, you are not required to pay any tax on the dividend. However, if your overall Total Taxable Income is sufficient to take you into the Higher Tax Bracket, you will pay tax on the dividend at (wait for it) 32.5%.
Logical? Of course not - it's British Tax at work.
>> Edited by eric mc on Thursday 17th July 00:14
However, when you are completing your Self Assessment tax return, you must show the Gross Dividend of £1,000 and the Notional Tax Credit of £100. The Gross Amount is added to your overall income to arrive at your Total Taxable Income. If your total taxaable income is not enough to take you into the Higher Tax Bracket, you are not required to pay any tax on the dividend. However, if your overall Total Taxable Income is sufficient to take you into the Higher Tax Bracket, you will pay tax on the dividend at (wait for it) 32.5%.
Logical? Of course not - it's British Tax at work.
>> Edited by eric mc on Thursday 17th July 00:14
crimson king 500 said:
Course you do, the only way you can get the dividends tax free is if you have them lodged in an ISA, that will be £365 for that advice please-hehe
Only 2 things in life that are certain, death & taxes.
CK500
cheers for the advice. so presumably the max amount you can put in stocks & shares isa's is £7000. What happens if you get more than that?
>> Edited by tim_s on Thursday 17th July 08:43
Crimson King is wrong - ALL tax payers receive their dividends totally free of tax IF THEY DO NOT EARN ENOUGH IN THE TAX YEAR TO ENTER THE HIGHER RATE TAX BAND. The 10% tax credit shown on the dividend is NOTIONAL tax i.e it does not exist! Nobody pays it, neither the company paying out the dividend or the individual receiving the dividend.
If you DO enter the higher rate tax band, you pay tax on the dividend at 32.5%
See my previous post.
If you DO enter the higher rate tax band, you pay tax on the dividend at 32.5%
See my previous post.
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