Tax On Non ISA Investments

Chris75

Bowlhead99

Thanks for your very full reply.

I think that the £77499 savings income in your 1st paragraph is not what you meant. To make sure I am reading this correctly please clarify.

badger09

Chris75 wrote: »

Bowlhead99

Thanks for your very full reply.

I think that the £77499 savings income in your 1st paragraph is not what you meant. To make sure I am reading this correctly please clarify.

Sticky fingers? £7499? (£10000+£7499 ie £11500+£5000+£499):cool:

bowlhead99

Chris75 wrote: »

I think that the £77499 savings income in your 1st paragraph is not what you meant. To make sure I am reading this correctly please clarify.

Typo, now fixed. You were talking about the £17500 threshold so my example figure was supposed to be £10k of earnings and £7499 of interest.

Chris75

bowlhead99 wrote: »

Typo, now fixed. You were talking about the £17500 threshold so my example figure was supposed to be £10k of earnings and £7499 of interest.

I thought that it might be but with this sort of think I could find it easy to confuse myself!

Dazed_and_confused

If it did not change my tax bracket nothing extra would be payable up to £5000 (£2000 2018/9)?

Correct

Incorrect. There are at least four different situations where this is wrong.

Elderly married pensioner with decent income (£27k+) will still be a basic rate payer and have no tax to pay directly on dividend income upto £5000 but they will have a higher tax bill with the dividend income included because they will lose some of their married couples allowance.

Higher rate payer could remain a higher rate payer with upto £5000 of dividends but would also lose some of their personal allowance if the dividends take them into, or add to, income in the £100-123k band (2017:18 tax year)

Child benefit recipient (or spouse of recipient) could remain a higher rate payer but have a High Income Child Benefit Charge (or a higher charge than would otherwise be due) if the dividends took their income over £50k, or increased it if already in the £50-60k band.

Someone in receipt of Marriage Allowance would lose this (worth upto £220 last year) if the dividends would have made them a higher rate payer if it weren't for the dividend allowance rate band

Dazed_and_confused

Let's say in a different example you had total income from salary or pension and interest from different sources which took you up to £44500 grand total income. As you probably know, the threshold for high rate tax is 40%. You pay whatever tax you need to pay on that lot and it's all at 0% or 20%.
Then you receive some dividends: £1000, £2000, £3000, £4000, £5000. You might have been thinking that it's all covered by your dividend allowance so no dividend tax to pay, and as mentioned before, dividends sit 'on top' of the other income types, so you won't be pushing any other types of income up into the higher tax brackets...

Except up here in Scotland this could be a bit different as you will normally be paying some 40% tax as soon as your annual taxable salary/pension reaches £43000 this year rather than the £45000 enjoyed by the rest of the UK

bowlhead99

Dazed_and_confused wrote: »

If it did not change my tax bracket nothing extra would be payable up to £5000 (£2000 2018/9)?

Correct

Incorrect. There are at least four different situations where this is wrong.

Apologies for any confusion; basically no tax is payable on the dividends themselves but it's possible for extra tax to be payable on the rest of your income due to losing an allowance or relief.

That was the purpose of the second half of my post which gave an example of an allowance or 0% rate being lost once you tipped into a certain level of income "...you might find you pay more tax because at some level of earnings, some allowances or reliefs might be lost". Which is the case with your examples

Dazed_and_confused wrote: »

Except up here in Scotland this could be a bit different as you will normally be paying some 40% tax as soon as your annual taxable salary/pension reaches £43000 this year rather than the £45000 enjoyed by the rest of the UK

Yes, Scotland is poorer than the rest of the UK which is likely one reason that they tax more of the relatively wealthier people to pay more to the state to redistribute it to others.

Chris75

Fortunately none of the 4 circumstance highlighted by dazed & confused applies to me.

I had no idea that such an apparently simple question would have such a complicated answer! I am also aware that the whole lot could change with the next (or any) finance act.