Scottish Dividend Taxes

DoctorStrange

Hi.

I'm a little confused with the dividend taxes in Scotland.

If my income + dividends is within the basic rate band, the dividend is taxed at 7.5%

But what happens if my income is with the Scottish basic rate band, but my Dividend takes me over the Scottish higher rate band but below the English one?

E.g say I get paid 40k in 2019/20 and receive a £10k Dividend.

As the Scottish higher rate starts at £43k, is £7k of the dividend taxed at 32.5%?

Or is the Scottish tax bands restricted to Income only, and therefore the whole £10k can be taxed at 7.5%?

Dazed_and_confused

Scotland has no power over taxation of dividends (or interest for that matter).

And don't forget there is dividend nil rate of tax before the 7.5% applies.

As a Scottish resident for tax purposes you get two basic rate thresholds. One for your wages, pension, rental income, business profits that type of thing.

And then the rest of the UK one applies to savings interest and dividends.

So in your example there would be no higher rate tax payable on the dividends.

£40,000 salary uses up your Personal Allowance and most of the Scottish basic rate band.

Dividends nil rate (£2,000) and the remaining dividends use up the remainder of the (UK) basic rate band. Nothing is taxed at 32.5%. Assuming that you only have these two sources of taxable income and nothing else. And the tax year is 2019:20.

Heedtheadvice

Quite well put by D&C.


Summing up (and a generalism) ;

there is a geographical split (depending upon where your main residence is) for the 'earned' income and associated reliefs/tax bands/tax rates..... (England/Wales/NI or Scotland)...........


and a common Uk one for the unearned aspects etc.


Thus individual's tax calculations sometimes need to be effectively done twice -at least from the point of view of totalling to decide what applies to the differing types of income!


Let's hope the crazy system does not get any worse and the Scottish gov come to their senses by not only preventing more complexity but removing that already introduced!

Dazed_and_confused

Thus individual's tax calculations sometimes need to be effectively done twice -at least from the point of view of totalling to decide what applies to the differing types of income!

Good way of putting it.

molerat

Heedtheadvice wrote: »

Let's hope the crazy system does not get any worse and the Scottish gov come to their senses by not only preventing more complexity but removing that already introduced!

:rotfl:They have so far fiddled with council tax and income tax to appeal to the SNP core supporter demographic so I see little hope of that ever happening. :rotfl:

DoctorStrange

Thanks guys

jem16

Dazed_and_confused wrote: »

£40,000 salary uses up your Personal Allowance and most of the Scottish basic rate band.

It actually uses up all of the Scottish Basic rate band as it’s only up to £24k. It then uses up most of the Intermediate rate band.

The whole thing is now ridiculously complicated.

Dazed_and_confused

Very good point, I was oversimplifying things just a bit!

Looking back I think I was really meaning that the band's before higher rate would nearly be used up, which of course is starter, basic and intermediate for Scottish taxpayers

Joyce987

Has anyone noticed that the Personal Savings Allowance information on the gov.uk website has been withdrawn as of 03/07/18? This referred to Adjusted Net Income and took into account pension contributions made.

The savings document is now similar to the Tax on Dividends one that refers to your Income Tax Band.

I've just had a discussion with HMRC over what this actually means. They're saying that I'm still in the Higher Rate Band, as my income falls into that category, regardless of my deductions/allowances/pension contributions which bring me into the basic rate category (I'm ignoring all the fancy naming conventions of the Scottish categores and keeping it simple).

Anyone else had any issues with this?


Thanks