Share dividends and income tax

schiff

This concerns everyday dividends from quoted companies eg. BT, Barclays, etc.
They have always had notional tax credit of 10% attached to them which has meant no further tax to pay for Basic Rate taxpayers. But I am aware that this tax credit relief has recently been withdrawn (thank you again Gordon!) but I'm not sure from when. Was it withdrawn in 2005/06 or does it start in the new tax year starting tomorrow?
In either event how are dividends now taxed on a BR taxpayer under the new 'no tax credit relief' regime?
If there is a charge to tax on BR taxpayers, it's going to bring a lot of people back into the self-assessment system, who currently don't get return forms.

EdInvestor

This change only applied to ISAs.There continues to be no tax payable on dividends for basic rate taxpayers.

cheerfulcat

Hi, schiff,

This concerns everyday dividends from quoted companies eg. BT, Barclays, etc.
They have always had notional tax credit of 10% attached to them which has meant no further tax to pay for Basic Rate taxpayers. But I am aware that this tax credit relief has recently been withdrawn (thank you again Gordon!) but I'm not sure from when. Was it withdrawn in 2005/06 or does it start in the new tax year starting tomorrow?

The tax credit is still there; what was withdrawn was the ability of ISA and pension investors to reclaim the tax credit ( this is also blamed by some for the " black holes " in pension funds ). It was withdrawn wef tax year 04-05.

In either event how are dividends now taxed on a BR taxpayer under the new 'no tax credit relief' regime?
If there is a charge to tax on BR taxpayers, it's going to bring a lot of people back into the self-assessment system, who currently don't get return forms.

Dividends are taxed at 10% for a BR payer; this is covered by the tax credit.

ceejam

My employer has announced that they are to pay a special dividend, as part of a return of cash to shareholders.

I have some shares through an ESOP. They say the dividend is £1.20 per share, does this mean I get £1.20, or £1.20 minus 10%?

Cheers
Jamie

reddevilled

ceejam wrote:

My employer has announced that they are to pay a special dividend, as part of a return of cash to shareholders.

I have some shares through an ESOP. They say the dividend is £1.20 per share, does this mean I get £1.20, or £1.20 minus 10%?

Cheers
Jamie

You should receive the £1.20 a share. A company will normally quote the net dividend payable.

Aark

They say the dividend is £1.20 per share, does this mean I get £1.20, or £1.20 minus 10%?

The dividend of £1.20 is the dividend you get.

There isn't really a "net" figure for UK dividends. The "net" dividend is the only amount which the company pays. No tax is deducted at source. The tax credit of 1/9th of the dividend is just a creation of the tax system, this amount does not actually exist or get paid to the Revenue. Therefore, it makes some kind of sense that the tax credit cannot be repaid, as it was never paid in the first place.

ceejam

Cool, sorry for the slight thread hijack!