Tax calculation

RacingDriver

Can someone help me understand why dividends seem to be taxed at 20% rather than 8.75/33.75%?

HMRC:

Pay from all employments £49,318.00
Dividends from foreign companies £548.00
Interest from UK banks, building societies and securities etc £415.00
Dividends from UK companies £428.00

Total income received £50,709.00
minus Personal Allowance £12,570.00

Total income on which tax is due £38,139.00

Pay, pensions, profit etc. (UK rate for England and Northern Ireland)
Basic rate £37,224.00 x 20% £7,444.80

Savings interest from banks or building societies, securities etc.
Basic rate band at nil rate £415.00 x 0% £0.00

Income Tax due after allowances and reliefs £7,444.80
minus Foreign Tax Credit Relief £83.00

Income Tax due after tax reductions £7,361.80

My calculations:

Employment = £49,318 - £12,570 (Personal Allowance) = £36,748 * 20% = £7,349.60 tax due

£952 of basic rate band left

Savings = £415 * 0% (Personal Savings Allowance) = £0 tax due

£537 of basic rate band left

Dividends = £548 + £428 = £976
First £500 at 0% (Dividend Allowance)
£37 of basic rate band left
£37 * 8.75% = £3.23
£439 * 33.75% = £148.16
= £151.39 tax due

£7,349.60 + £151.39 - £83 (Foreign Tax Credit Relief) = £7,417.99 vs HMRC's £7,361.80

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6662447/tax-calculation

Has beneficial ordering been applied?

This could make more of your earnings taxable at 20%, but avoid having to pay tax at 33.75%.

Will have to check the figures but that seems a possibility.

Is this a SA302 calculation or a P800?

RacingDriver

It's an SA302, and yes I presume HMRC have applied beneficial ordering

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948086#Comment_81948086

But you think that is incorrect?

RacingDriver

I'd just like to understand exactly how it's been calculated

I don't understand why the dividends have been lumped into the 20% income tax rate, rather than using dividend tax rates?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948091#Comment_81948091

I think you have misunderstood beneficial ordering.

It's where HMRC have allocated your Personal Allowance in such as a way as to give you the lowest overall liability.

Why do you think the dividends have been taxed at 20%? Nothing in your original post suggests that.

RacingDriver

HMRC have: Basic rate £37,224.00 x 20% £7,444.80

I thought £37,224 was calculated as £49,318 employment + £548 foreign dividends + £428 UK dividends - £12,570 personal allowance - £500 dividend allowance = £37,224

Is that not correct?

If it is correct why are the dividends above the allowance of £476 not taxable at dividend tax rates?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948106#Comment_81948106

In your original post you said something a bit different.

Pay, pensions, profit etc. (UK rate for England and Northern Ireland)

Basic rate £37,224.00 x 20% £7,444.80

What does the wording on the calculation say?

RacingDriver

That is the exact wording on the calculation, everything under HMRC in my original post is directly copied from the calculation

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948115#Comment_81948115

And you haven't inadvertently missed something from this bit of your original post?

Pay, pensions, profit etc. (UK rate for England and Northern Ireland)
Basic rate £37,224.00 x 20% £7,444.80

Savings interest from banks or building societies, securities etc.
Basic rate band at nil rate £415.00 x 0% £0.00

Income Tax due after allowances and reliefs £7,444.80
minus Foreign Tax Credit Relief £83.00

Income Tax due after tax reductions £7,361.80

RacingDriver

Nope, hopefully image works here…