Bank Shares

Linton

ViolaLass wrote: »

Can someone tell me if I've got this right? You pay 10% tax on the dividend and are given a tax credit, which then comes off any tax you have to pay from, say, your job. What if you don't earn enough money to pay tax that year, can you roll the credits over? Does being self employed make any difference? (I ask because there's a good chance I won't earn enough to pay tax next year but I will have dividends within an ISA)

Strictly speaking neither YOU nor anyone else pays 10% tax on dividends. What happens is that companies pay corporation tax on their profits before paying dividends ie dividends are paid out of taxed income. But for reasons I dont understand, rather than simply not taxing dividends, you are charged 10% (standard rate) tax on your dividends BUT are deemed to have already paid it as evidenced by the tax credit note. I guess it helps ensure that what you claim to be dividends really are dividends and so reduces tax evasion.

Which is why the repayment of tax on ISA/pension dividends was removed - it was never actually charged in the first place.

No, you cant roll dividend credits over,and wouldnt do you any good if you could. The tax credit doesnt reduce your taxes on your wages, its simply matches the hypothetical additional tax on your dividends.

Personally I dont see why people shouldnt pay full tax on dividends, but that's for another forum.

cheerfulcat

ViolaLass wrote: »

Can someone tell me if I've got this right? You pay 10% tax on the dividend and are given a tax credit, which then comes off any tax you have to pay from, say, your job. What if you don't earn enough money to pay tax that year, can you roll the credits over? Does being self employed make any difference? (I ask because there's a good chance I won't earn enough to pay tax next year but I will have dividends within an ISA)

The tax credit only applies to the dividend, not any other income.

FCRangers

I have no idea about shares but am i right in thinking if i bought 1000 shares at £1 would cost be £1000. If over the next year the share dropped to 0.50p a share my investment would be worth £500 but then in say 5 years the share value went to £2 per share i would have doubled my money and my investment would be worth £2000?

How would dividends work then? does the company say each year we are paying 0.10p per share so id gain £200 in a dividend if I had my shares worth £2000?

To me banking shares were never going to stay silly cheap so why would anyone sell them? just keep onto them for a few more year until they picked up again.

I understand you'd have to pay broker fees.

Lokolo

FCRangers wrote: »

I have no idea about shares but am i right in thinking if i bought 1000 shares at £1 would cost be £1000. If over the next year the share dropped to 0.50p a share my investment would be worth £500 but then in say 5 years the share value went to £2 per share i would have doubled my money and my investment would be worth £2000?

How would dividends work then? does the company say each year we are paying 0.10p per share so id gain £200 in a dividend if I had my shares worth £2000?

To me banking shares were never going to stay silly cheap so why would anyone sell them? just keep onto them for a few more year until they picked up again.

I understand you'd have to pay broker fees.

0.1p per share. You have 1000 shares. How did you get £200 out of that? Just because the share price has changed, the number of shares you own hasn't. Share price may have doubled, from the original purchase price but you still only have 1000 shares.