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Calculate how dividends over £5,000 will be taxed.
As the tax year 2016/17 closes we will see the calculations and the impact of the dividend allowance.
Dividends received over £5,000 will be taxed at the following rates:
- 7.5% on dividend income within the basic rate band
- 32.5% on dividend income within the higher rate band
- 38.1% on dividend income within the additional rate band.
In the example below the following limits are assumed:
Personal allowance £11,000
Basic rate limit £32,000
Higher rate threshold £43,000
Example
Mr C has salary income of £40,000 and dividend income of £9,000 from shares outside an ISA.
£
Salary 40,000
Dividends 9,000
49,000
Personal allowance (11,000)
38,000
Dividend allowance (5,000)
33,000
Salary income taxed at basic rate of 20% 29,000
Income taxed at dividend higher rate 32.5% 4,000
33,000
Tax payable £29,000 x 20% 5,800
Tax payable £4,000 x 32.5% 1,300
7,100
You can see more examples at ACCA’s UK technical advice and support pages.
Article from ACCA In Practice