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    • Malthusian
    • By Malthusian 27th Feb 17, 11:11 AM
    • 3,460 Posts
    • 5,303 Thanks
    Malthusian
    Do I really want to pay 20% on interest, and god forbid, 40%?

    Even if you only get 2.4% dividend, paying 7.5% tax instead of 20% is a no brainer, surely?
    Originally posted by Pincher
    You're forgetting that the company, i.e. you, has to pay corporation tax before they pay you the dividend. That was the logic behind the old system where you had no allowance but dividends had theoretically already been taxed at 10% when you received them.

    God knows what the actual rate of tax on dividends is after you have taken all expenses and allowances into account, but from the government's perspective it should be roughly tax-neutral so that companies neither hoard cash on their balance sheets nor pay as many employees as possible in dividends rather than salary.

    For banks the interest they pay to customers leaves the company before they pay corporation tax.

    2.4% dividend minus 7.5% tax is of course nicer than 2% interest minus 20% tax (if you have used up both allowances). Which is why you took a risk on being an investor rather than a depositor. But not because it's more tax-efficient, you are ignoring some of the tax that came out of the dividend before it landed in your pocket. The extra 0.62% net income is all risk premium, not a tax saving.
    • couplands
    • By couplands 18th Apr 17, 7:21 PM
    • 6 Posts
    • 0 Thanks
    couplands
    Has anybody got any views or experience of their mortgage products. My daughter is looking at them, with a low 1.34% interest rate.

    Sounds good but is it..?

    Kind regards

    Simon
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