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Do dividends impact the starting rate for savings?
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Notepad_Phil
Posts: 1,561 Forumite

Suppose a person was in receipt of £12,570 of taxable pension income, £1,000 of dividends and £6,000 of savings interest (both dividends and interest coming from taxable accounts): would they receive the full £5,000 starting rate for savings and so would just have £500 of the dividends being taxable, or do the dividends get added onto the pension income and thereby reduces the available starting rate and hence also bringing in additional taxation on some of the savings?
Before looking into this I thought that surely dividends would get added on, but it seems that is not actually correct, so I just wanted to get confirmation from the MSE collective that it is the case that in my example only the pension income impacts on the starting rate and so just some of the dividends will end up being taxed.
Many thanks.
Before looking into this I thought that surely dividends would get added on, but it seems that is not actually correct, so I just wanted to get confirmation from the MSE collective that it is the case that in my example only the pension income impacts on the starting rate and so just some of the dividends will end up being taxed.
Many thanks.
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Comments
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All the dividend income is taxable and would all be taxed.
£500 at 0% and £500 at 8.75%.1 -
Dazed_and_C0nfused said:All the dividend income is taxable and would all be taxed.
£500 at 0% and £500 at 8.75%.0 -
technically it might be worth you understanding that "income" is ranked in a set order established by statute law.
That order defines what is the "top slice" of income facing taxation.
As others have already explained, "savings" income is looked at before dividend income so the various thresholds applicable to interest are applied before the dividends thresholds are applied to the dividends
The order is defined in the Income Tax Act 2007 section 16- If a person has savings income but no dividend income, the savings income is treated as the highest part of total income.
- If a person has dividend income but no savings income, the dividend income is treated as the highest part of total income.
- If a person has both savings and dividend income, the amounts taken together are treated as the highest part of total income, and the dividend income is taken as the higher part of the combined amount.
1 - If a person has savings income but no dividend income, the savings income is treated as the highest part of total income.
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Various sites on the web say it is only non savings non dividend income which eats away at the starting rate for savings. MSE suggests it is just pension or wages. The Gov.UK site says other income (eg wages or pension) but I assume there must be something more specific somewhere which supports the non savings non dividend interpretation. One site suggested it was because dividends are taxed after savings but ????0
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DRS1 said:One site suggested it was because dividends are taxed after savings but ????0
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Bookworm105 said:DRS1 said:One site suggested it was because dividends are taxed after savings but ????
So I could in theory have dividend income of £200K and if I have no other income apart from £5K of savings interest I would pay 0% income tax on the savings interest?
Just a theoretical question.0 -
DRS1 said:Bookworm105 said:DRS1 said:One site suggested it was because dividends are taxed after savings but ????
So I could in theory have dividend income of £200K and if I have no other income apart from £5K of savings interest I would pay 0% income tax on the savings interest?
Just a theoretical question.1
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