"Good explained that the question relates to the 2015/16 tax year and therefore the CGT will be 28% for higher rate taxpayers."
This is in fact precisely NOT what Tim Good said. All are agreed that the CGT in the facts stated would be at 18%.
"She is paid her salary through dividends"???
Umm. I don't think so. I think that she is paid a return on investment by way of a substantial amount of investment income through dividends. Salaries are subject to PAYE, however paid.
The OP gave an example where a person " plans to reduce her salary to £8,060, as her one-person company will lose the employment allowance for 2016/17 and she doesn’t want to pay employer’s or employees’ NI for the year."
I see this suggestion a lot regarding 'topping up' with dividends. I may be missing something, but I think this means the person doing so would fail to achieve a qualifying year for the state pension. How does this person take advantage of the other benefits that come as a result of NI contributions?
Has everybody given up on trying to qualify for the state pension
Basically nonsense, sorry. £8060 is enough for the year to qualify for state pension.
4 minutes and 39 seconds in, Tim Good advises that we should "allocate allowances and rate bands in that prescribed order", which is to say non-savings, savings, dividends etc.
I agree with the rate bands allocation, and maybe in most cases the allowances, but not always in the latter.
Say you have £8K salary, £800 Interest, £20K dividends
I would want to allocate £8K PA to the salary, 3K PA to the dividends and nothing to the interest.
Or is that wrong?
Even swap it around, and say £20K salary, £2K interest, £8K dividends, and next year you have £11K trading losses carried back 1 year and relieved against total income. I would want £9K of the losses to go against the salary £1K against the savings and £1K against the divis. There will be no tax on the remaining £1K interest anyway.
s.25(2) ITA 2007 requires that personal allowances should be deducted against income sources under step 3 in s.23 in such an order as to minimise the tax liability.
In most cases (perhaps barring some fringe circumstances which I suspect that neither HMRC software, nor 3rd party which mimics HMRC, cope with) this historically resulted in the PA being allocated to income sources in priority according to their "slice" ranking, lowest slice first.
This PSA now possibly throws a cat among the pigeons. Suppose you have dividend income in excess of £5K but savings income that is wholly covered by the PSA. Any available PA you would want to set against dividend income in preference to savings income Indeed s.25 says that you must do so.
This is going to add a few hours to my spreadsheet design time.
Whenever I look at a Wikipedia article it is usually riven with references to external sources, usually hyperlinked to footnotes, showing the source of the information quoted in the Wiki. And when there is a shortage of sources someone else usually scrawls all over the article with "citation needed" messages.
So while the article may not itself be top notch, its reliability can be scrutinised.
OR, you can pre-object to the code by completing the previous year's tax return correctly in the first place, and save the aggro. It certainly should not come as a "shock", if you didn't bother to make that effort.
My answers
"Good explained that the question relates to the 2015/16 tax year and therefore the CGT will be 28% for higher rate taxpayers."
This is in fact precisely NOT what Tim Good said. All are agreed that the CGT in the facts stated would be at 18%.
With kind regards
Clint Westwood
"She is paid her salary through dividends"???
Umm. I don't think so. I think that she is paid a return on investment by way of a substantial amount of investment income through dividends. Salaries are subject to PAYE, however paid.
You are missing something
Basically nonsense, sorry. £8060 is enough for the year to qualify for state pension.
With kind regards
Clint Westwood
4 minutes and 39 seconds in, Tim Good advises that we should "allocate allowances and rate bands in that prescribed order", which is to say non-savings, savings, dividends etc.
I agree with the rate bands allocation, and maybe in most cases the allowances, but not always in the latter.
Say you have £8K salary, £800 Interest, £20K dividends
I would want to allocate £8K PA to the salary, 3K PA to the dividends and nothing to the interest.
Or is that wrong?
Even swap it around, and say £20K salary, £2K interest, £8K dividends, and next year you have £11K trading losses carried back 1 year and relieved against total income. I would want £9K of the losses to go against the salary £1K against the savings and £1K against the divis. There will be no tax on the remaining £1K interest anyway.
With kind regards
Clint Westwood
Ordering of PA
s.25(2) ITA 2007 requires that personal allowances should be deducted against income sources under step 3 in s.23 in such an order as to minimise the tax liability.
In most cases (perhaps barring some fringe circumstances which I suspect that neither HMRC software, nor 3rd party which mimics HMRC, cope with) this historically resulted in the PA being allocated to income sources in priority according to their "slice" ranking, lowest slice first.
This PSA now possibly throws a cat among the pigeons. Suppose you have dividend income in excess of £5K but savings income that is wholly covered by the PSA. Any available PA you would want to set against dividend income in preference to savings income Indeed s.25 says that you must do so.
This is going to add a few hours to my spreadsheet design time.
Form 930 is dead. Long live Form 930.
With kind regards
Clint Westwood
Oh dear this is going to be time consuming
Have just received a 2016-17 PAYE code showing a restriction of £130 for untaxed interest.
Coincidentally, 2014-15 tax return showed (gross) £130 of taxed interest.
And this is a basic rate taxpayer.
So even accepting the lack of tick on box 3 as reflecting the taxpayer's desires, it is wrong.
I hope that this is not automated.
With kind regards
Clint Westwood
Eh?
You would rather pay tax on the untaxed interest?Odd
Whenever I look at a Wikipedia article it is usually riven with references to external sources, usually hyperlinked to footnotes, showing the source of the information quoted in the Wiki. And when there is a shortage of sources someone else usually scrawls all over the article with "citation needed" messages.
So while the article may not itself be top notch, its reliability can be scrutinised.
Maybe not.
With kind regards
Clint Westwood
Re 2 final paragraphs
Yes you can object to the code.
OR, you can pre-object to the code by completing the previous year's tax return correctly in the first place, and save the aggro.
It certainly should not come as a "shock", if you didn't bother to make that effort.
With kind regards
Clint Westwood
I expect that more will take it up, as it becomes better publicised.
They have until 05 April 2021 to claim for 2016-17. Only then will you be sure of the numbers.
With kind regards
Clint Westwood