Hi, can anyone tell me what the impact is on a couple receiving tax credits if the receive a dividend. I've looked all over but can't find out. If they rec'd a dividend of say £1k does it reduce the tax credit £ for £ i.e. £1k or 50p in the £ or what? I've tried running the HM calculator but it doesn't even match what they getting now and the client has had problems in the past with claims.
Marry Christmas to all
Mark Peters
Replies (2)
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You include the dividends ...
... in the category of "Other Income".
See
http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04501.htm
Don't forget to gross up the dividend for the dividend tax credit (not to be confused with the child tax credit).
Don't forget to deduct £300 from the total of "Other Income".
If the dividend is from a company controlled by the claimant, consider whether anti-avoidance rules might require an increase to the dividend as notional income, per
http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04800.htm
There are basically three rates of abatement of child/working tax credit depending on the the total income levels in current and previous year and on the headline award level.
It could be any one of 0%, 39% or 6.67% (or to be more accurate 1/15). Additionally, if the dividend is of such an amount as to span two different abatement thresholds the effective marginal abatement rate would be something else again.
39p in £
£1 extra income knocks 39p off the Tax Credit as far as I know but not sure about dividends.