Special dividends & tax

JEC

Just heard that I'll benefit from a one-off share dividend from Boots from the sale of BHI and was wondering how this will be treated tax-wise.

reddevilled

If it is a dividend rather than a capital payout then you will pay no further tax if you are not a higher rate tax payer, or 25% on the net dividend if you are a higher rate tax payer.

If it is a capital payout then it will be subject to capital gains tax. You will have an annual exemption of around £8500 and any gain above that will be taxed at your own tax rate (ie 10, 20 or 40%).

If there is further tax to pay then it will be due on 31 January following the end of the tax year in which it is paid (ie 31 Jan 2007 if paid between now and 5 April 2006).

HTH