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Tax calculation

Tax calculation

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2015/2016 income comprises a salary of £5000 and (net) dividend of £50000.  Personal allowance £10600.  Is the additional tax payable £3528.25 or £4088.25?

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By Gem7321
28th Oct 2015 15:41

I disagree

The liability is £4088.25

But the OP is asking for the amount of tax payable which is £3528.25

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Replying to North East Accountant:
paddle steamer
By DJKL
28th Oct 2015 16:15

Are you sure

Gem7321 wrote:

I disagree

The liability is £4088.25

But the OP is asking for the amount of tax payable which is £3528.25

 

Are you sure:

 

Salary                 £5,000.00

Dividends net      £50,000.00

Tax credit on Div £ 5,555.55

Gross Income    £60,555.55

Personal Allowance£10,600

Taxable              £49,955.55

B Rate  31,785

H Rate  18,170.55

Tax @ 32.5% on higher rate £5905.43

Tax credit on higher rate      £1.817.06

Tax now payable £4,088.37

 

Or Gross dividends in Higher Rate £18,170.55

Net equivalent £16,353.50

Tax @ 25% on net £4,088.37

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Replying to North East Accountant:
RLI
By lionofludesch
28th Oct 2015 16:37

Me too

Gem7321 wrote:

I disagree

The liability is £4088.25

But the OP is asking for the amount of tax payable which is £3528.25

I disagree with your disagreement.

You can't use your personal allowance against dividend income.

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By readmylips
28th Oct 2015 16:44


I think you can use personal allowance against dividend income - you just can't have a repayment of dividend tax.

I think tax payable is £3528.25

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Replying to littletosh:
RLI
By lionofludesch
28th Oct 2015 16:58

Same thing

readmylips wrote:

I think you can use personal allowance against dividend income - you just can't have a repayment of dividend tax.

Sure, it's what the legislation says, so it is.  But in reality, it's the same thing. 

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Stepurhan
By stepurhan
28th Oct 2015 16:49

Tax credit?

Isn't the tax credit being abolished from 6/4/2015? (i.e. there should be no such thing as a net dividend in this calculation) or am I getting ahead of myself.

EDIT : Yes, moment of madness. That's 6/4/2016 isn't it.

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By justsotax
28th Oct 2015 16:50

I am in the

£4088 camp.  dividend credit restricted to £4,995 as £5,600 of the dividend falls within the personal allowance (giving the difference of £560)

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By cheekychappy
28th Oct 2015 16:50

Ahead of yourself. It's from April 16.

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By Tim Vane
28th Oct 2015 18:41

Bizarre. Quite a long thread for such a basic question that was answered correctly in the first response. I hope that those who think the first answer was wrong will be doing a bit of CPD.

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By cheekychappy
28th Oct 2015 19:49

Tim if it makes you feel any better, I have seen longer threads on more fundamental subjects.

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By readmylips
29th Oct 2015 08:59

Doh! Senior moment, I think - sorry

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By JStone101
29th Oct 2015 11:17

Tax calculation

Thanks for the interest.  I am slightly embarrassed in that my son (who is not an accountant) told me that that the answer was £4088 (and not £3528 as I had originally calculated).  I posted the query to resolve the dispute between us!

I have been searching the book of words for an authority on this.  The best I can come up with on the restriction of the tax credit in these circumstances is the fifth paragraph of HMRC manual section SAIM5100.

 

As others have already pointed out - all this becomes somewhat academic from next April

 

 

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