Tax on Dividend

Hi guys,

Please can someone validate a tax calculation for me. First time for me paying a dividend for a client that goes into the higher tax bracket....!

8000k Paye

45k Net Dividend

50k Gross Dividend

58k Total Income.

26370 dividend paid and taxed at 10%

(26370 and 8000 paye = 34370 / 10% limit)

23630 dividend paid and taxed at 32.5%

No tax to pay on the 26370 as the 10% dividend tax credit covers it.

On the 23630, 32.5% equates to 7679.75. 10% credit reduces it by 23630 x 10% = 2363, thus 7679 - 2363 = 5316. Thus, that would seem to be the remaining tax to pay.

However in practice, it seems that 23630 x 25% = 5907.5 of which only 15% remains so remaining liability is 23630 x 15% = 3544. Is this the correct figure that would be paid at the end?

That being the case, can someone please explain to me if the dividend credit is only 10%, then why does the 32.5% tax not get paid on the higher bracket. it seems as though the credit becomes 17.5% on the higher band...

Many thanks guys.. as always.....

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