Dividend tax-were we screwed over ?
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C_Mababejive
Posts: 11,654 Forumite
in Cutting tax
OK it happened a couple of years back and my understanding was that if you were a BR tax payer in that era before the changes,well you received your divis and had no more to pay.
Fast forward to the deception that occurred in the budget and we then learn that BR taxpayers could receive divis upto 5k with nothing more to pay. Above that,and as long as they remained a BR taxpayer, it was 7.5%.
If you slipped into HR it became 32.5% ?
Government very quickly changed the 5k to 2k.
So essentially ,by a grand deception, we were screwed over ?
Suddenly lots of people were in the frame for a 7.5 % charge.
Why 32.5 for HR payers anyway??
At these levels you'd be better off dumping the shares and not taking the risk of holding them !
Fast forward to the deception that occurred in the budget and we then learn that BR taxpayers could receive divis upto 5k with nothing more to pay. Above that,and as long as they remained a BR taxpayer, it was 7.5%.
If you slipped into HR it became 32.5% ?
Government very quickly changed the 5k to 2k.
So essentially ,by a grand deception, we were screwed over ?
Suddenly lots of people were in the frame for a 7.5 % charge.
Why 32.5 for HR payers anyway??
At these levels you'd be better off dumping the shares and not taking the risk of holding them !
Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
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Comments
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The rates were set so that you were effectively being taxed similar to normal income tax rates but accounting for the corporation tax that had already been paid (which is currently 19%).
For example, ignoring the dividend allowance for this example:
£10k of taxable company profit.
Corporation tax paid: £1900.
£8100 distributed as a dividend.
Basic rate dividend tax paid: £607.5
Total tax as percentage of the original £10k: approx 25%.
This still compares favourably to normal income which would pay tax at 20% plus national insurance which dividends still do not incur.
But yes the tax treatment was changed to be less favourable.0 -
Can you put the shares into an ISA?0
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BR tax payer in that era before the changes,well you received your divis and had no more to pay.
For most yes but not everyone. People who claimed Married Couple's Allowance could have lost part of their Married Couple's Allowance and had a higher tax bill overall under the old system.0 -
I don’t see why you would be better of dumping the shares, and you do have the option of shifting £20ks worth into an ISA every year, so if you have been in for the long term you will have had the opportunity to move a large amount into that tax free wrapper.0
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C_Mababejive wrote: »OK it happened ...
Feel better for that rant?
Simplifying the dividend regime has been good for the majority. It is not as good as it was, but the £2,000 allowance still takes a lot of tax-payers out of dividend tax - a good thing in itself.
As for the figures - you are surely aware that they are not at all arbitrary. They are all part of a process of balancing the taxation on different sources of income. The three non-zero rates are:
12/160, 52/160 and 61/160
- all quite logically derived, although the additional tax rate is rounded down from the theoretical 0.38125 to 38.1%.0
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