Tax calculation

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948125#Comment_81948125

So for me that shows some of your Personal Allowance has been used against the dividend income. What I don't follow is why the remaining £500 isn't shown as being taxed, like the interest is?

The only thing I don't know for certain is if the FTCR is really due in this situation, when you have not been charged any UK tax on the dividend income?

phlebas192

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

As others have suggested, HMRC have used beneficial ordering to your benefit. Without this, your (higher) calculation of £7,417.99 would be used.

The beneficial ordering in your case means that dividends are taxed first. £500 is taxed at 0% from the dividend allowance and the remaining £476 uses up that amount of your personal allowance. The remaining £12,094 of the PA is then used for the employment income resulting in £37,224 of that being taxed at 20%.

Unfortunately, HMRC doesn't seem to actually bother telling you that this is what has happened in such a scenario!

RacingDriver

The beneficial ordering in your case means that dividends are taxed first. £500 is taxed at 0% from the dividend allowance and the remaining £476 uses up that amount of your personal allowance. The remaining £12,094 of the PA is then used for the employment income resulting in £37,224 of that being taxed at 20%.

With basic rate band of £37,700, after dividend 0% allowance that leaves £37,200, so why is the full £37,224 taxed at BR, and not £24 at HR band?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81948688#Comment_81948688

Once the Personal Allowance has been allocated there is a set order in which income is taxed.

Non savings non dividend income first.

Then savings income.

Then dividends.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81948688#Comment_81948688

Good point. I can only assume that they don't include the dividend allowance in the calculation of the taxable income for BR / HR purposes.

RacingDriver

https://forums.moneysavingexpert.com/discussion/comment/81948716#Comment_81948716

Thanks, I always thought that the Dividend Allowance (and Personal Savings Allowance) did use the BR / HR bands just at a rate of 0%

therme

I’ve been using this calculator, and it usually gives accurate results.

https://thetaxcalculator.co.uk/income-tax-calculator/

Annual Summary
Gross Income	£49,318.00
Personal Allowance	£12,570.00
Income Tax	£7,349.60
National Insurance	£2,939.84
Take-Home (Annual)	£39,028.56
Take-Home (Monthly)	£3,252.38
Take-Home (Weekly)	£750.55
Effective Tax Rate	14.90%

dales1

https://forums.moneysavingexpert.com/discussion/comment/81948731#Comment_81948731

You thought correctly. But you are getting Higher Rate relief at 0% on some of your Dividend Allowance.

Your 12,570 Personal Allowance is allocated 476 to Dividends (to avoid HR tax rates) and 12,094 to Income.

Your 37,700 basic rate band is allocated 37,224 to Income, 415 to Interest and 61 to Dividends.

Your tax is 49,318 Pay - 12,094 PA = 37,224 @ 20% = 7,444.80 (less the tax credit)

Your Dividends are covered by the Dividend Allowance (61 in BR band, 439 in HR band, all at nil rate) plus 476 PA at nil rate.

And your Interest is all covered by the Interest Allowance (415 in BR band at nil rate).