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:
In the following examples the following limits are assumed:
Personal allowance: £11,000
Basic rate limit: £32,000
Higher rate threshold: £43,000
1. Mr A has salary income of £6,500 and dividend income of £12,000 from shares outside an ISA.
£
Salary 6,500
Dividends 12,000
18,500
Personal allowance (11,000)
7,500
Dividend allowance (5,000)
Income taxed at dividend basic rate of 7.5% 2,500
Tax payable £2,500 x 7.5% = £187.50
2. Mr B has salary income of £18,000 and dividend income of £22,000 from shares outside an ISA.
£
Salary 18,000
Dividends 22,000
40,000
Personal allowance (11,000)
29,000
Dividend allowance (5,000)
24,000
Income taxed at dividend basic rate of 7.5% 17,000
Salary income taxed at basic rate of 20% 7,000 24,000
Tax payable £17,000 x 7.5% 1,275
Tax payable £7,000 x 20% 1,400
2,675
3. 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 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 technical advice and support pages.