Explain tax on divis to me please

C_Mababejive

Did a search,googled,read etc so let me see if ive got this right or wrong..


if im a basic rate taxpayer..

dividends are paid and there is something called a tax credit which i dont fully understand. Explain??

Last budget we heard about a 5k tax free allowance for divis and after that you have to pay some tax??

So if i currently receive £5000 worth of divis then after April 2016 and assuming divi payments remain the same, will i receive the same,more or less total divi monies?

If i were a basic rate taxpayer just below the basic rate threshold and for example i was lucky enough to receive divis of say £15k pa,,what would the position be after April 2016??

Would i still be a basic rate taxpayer who also had to pay 15k-5k=10k at 7.5% or would the fact that i receive 10k divis above the 5k allowance, drag me into a higher tax bracket and mean id have to pay more tax?

Would i have to fill in a self assessment?

tnx

xylophone

http://www.rossmartin.co.uk/directors/tax-efficient-remuneration/1591-summer-budget-2015-dividend-tax

https://www.hl.co.uk/shares/dividends-tax-calculator

george4064

In case you're not aware, any dividends received within an ISA or a SIPP do not incur any further tax.

All dividends are paid net of the 10% tax which is non-recoverable.

Eco_Miser

george4064 wrote: »

All dividends are paid net of the 10% tax which is non-recoverable.

And is not deducted in the first place. The soon to be abolished 10% tax credit is to avoid taxing income which was already taxed as corporate profit.

fifeken

Eco_Miser wrote: »

And is not deducted in the first place. The soon to be abolished 10% tax credit is to avoid taxing income which was already taxed as corporate profit.

Can you expand on this please?

I recently received my first dividends and called the tax office for advice. Their response was that the dividends were taxed at source, and more tax would only be due by higher rate taxpayers.

They also mentioned that share sales would only be taxed if any profit was greater than £11,100 (for 2015).

masonic

fifeken wrote: »

Can you expand on this please?

I recently received my first dividends and called the tax office for advice. Their response was that the dividends were taxed at source, and more tax would only be due by higher rate taxpayers.

They also mentioned that share sales would only be taxed if any profit was greater than £11,100 (for 2015).

See https://forums.moneysavingexpert.com/discussion/comment/69336661#Comment_69336661 and subsequent posts.

JohnRo

This might help, it has some basic taxation examples although the CGT tax free personal allowance (£11,100) is not shown in them.
http://www.theaic.co.uk/sites/default/files/AICTaxationofDividendsConsumerguide.pdf

C_Mababejive

So the only ways to avoid/delay tax are;

Sell the excess shares
put them in an ISA (tricky for large volumes)
SIPP...but there would be tax to pay at the withdrawl end??

masonic

C_Mababejive wrote: »

So the only ways to avoid/delay tax are;

Sell the excess shares
put them in an ISA (tricky for large volumes)
SIPP...but there would be tax to pay at the withdrawl end??

You could leave the shares where they are and just pay the excess income into a SIPP in order to avoid paying any higher rate tax. Getting what you can into an ISA would be beneficial for CGT reasons.

Man_on_fire

C_Mababejive wrote: »

Did a search,googled,read etc so let me see if ive got this right or wrong..


if im a basic rate taxpayer..

dividends are paid and there is something called a tax credit which i dont fully understand. Explain??

Last budget we heard about a 5k tax free allowance for divis and after that you have to pay some tax??

So if i currently receive £5000 worth of divis then after April 2016 and assuming divi payments remain the same, will i receive the same,more or less total divi monies?

If i were a basic rate taxpayer just below the basic rate threshold and for example i was lucky enough to receive divis of say £15k pa,,what would the position be after April 2016??

Would i still be a basic rate taxpayer who also had to pay 15k-5k=10k at 7.5% or would the fact that i receive 10k divis above the 5k allowance, drag me into a higher tax bracket and mean id have to pay more tax?

Would i have to fill in a self assessment?

tnx

The government is conducting a tax rise, people who are basic rate tax payers who earn over £5000 in dividends outside of ISAs will now pay tax. Which is a form of double taxation, as the company should have already paid tax on their profits anyways.

C_Mababejive

Man_on_fire wrote: »

The government is conducting a tax rise, people who are basic rate tax payers who earn over £5000 in dividends outside of ISAs will now pay tax. Which is a form of double taxation, as the company should have already paid tax on their profits anyways.

Hi..and thanks,,yes i see that and i think the Government tried to slipstream this through by suggesting that it was a way of finally clamping down on those cunning small businesses/self employed types who pay themselves an income via dividends and so pay less tax and i further suspect that lots and lots of people dont realise that actually, it applies to everyone has has a high divi income. Many of these people will reply on it for income post retirement !