Today's BBC Moneybox programme (Personal and Small Business Tax)

[jamesbrown]

Yeah that I get, but have you then used 17k (or 16k if we ignore the tax free interest) towards the lower tax bracket, or have you only used 11k.

Sorry, I see what you mean now. Yes, the first 5k is described as "tax free" (i.e. an independent allowance), so the allowance should be removed from the total dividend income and the remaining dividend income taxed in the normal way, as the top slice of income, above salary and savings interest. That could change. However, if it's "clarified" as being something other than "tax free", then the chancellor misspoke. That's also possible.

[northernladuk]

Very interesting.. I find it a bit hard to believe we'll be almost better off by taking the notional amount out as described so will wait and see what my accountant says before I get the champagne out.

[mudskipper]

Interesting - thanks cojak.

Paula Tallon | Gabelle LLP Tax Consultants appears to be our expert.

[jamesbrown]

Very interesting.. I find it a bit hard to believe we'll be almost better off by taking the notional amount out as described so will wait and see what my accountant says before I get the champagne out.

I note the "almost" , but we won't be better off under any circumstances. Marginally worse off in real terms when exploiting the full lower rate band next year, but with the tax planning possibility of paying zero additional tax up to the higher rate limit removed. In other words, you'd be 1.7k worse off in taking the optimal salary/dividend mix from this year and applying it next year. It just depends how you want to look at it. The tax planning possibility has been removed, but you can break even in real terms by taking a higher amount next year.

[mudskipper]

The gist of it is that the 5K does not count towards your tax bands. So for those of us who take divvies up to the higher tax bracket, we're better off. Will attempt sums in the morning.

[jamesbrown]

The gist of it is that the 5K does not count towards your tax bands. So for those of us who take divvies up to the higher tax bracket, we're better off. Will attempt sums in the morning.

Not better off, at least for the typical contractor. You'd be better off in a PAYE scenario, as a higher rate tax payer, with 5k (or more, up to a point of around 22k) of dividend income.

[SandyD]

How do people think we will be better off? Are you forgetting that whatever we take out tax efficiently we will need to pay our T&S from? Or did I get that wrong?

I only have a monthly tube travel, but even that comes to £2040 a year

[TheFaQQer]

How do people think we will be better off? Are you forgetting that whatever we take out tax efficiently we will need to pay our T&S from? Or did I get that wrong?

I only have a monthly tube travel, but even that comes to £2040 a year

It's all relative

As regards dividends, if this is right (and I need to update my calculator now, I think) then we are less worse off than first appeared.

And the travel and subsistence is still in consultation...

[mudskipper]

It's all relative

As regards dividends, if this is right (and I need to update my calculator now, I think) then we are less worse off than first appeared.

And the travel and subsistence is still in consultation...

I couldn't make us better off (ignoring T&S) unless you were only going to take a 5K divvy - at a certain level (a bit into what is currently the higher tax bracket), the amount worse off became much smaller.

[jamesbrown]

I couldn't make us better off (ignoring T&S) unless you were only going to take a 5K divvy - at a certain level (a bit into what is currently the higher tax bracket), the amount worse off became much smaller.

Ironically, as a higher rate tax payer on PAYE, you'd be quite a lot better off in receiving dividends above the higher rate limit versus the current approach (up to about 22k of dividends, where the effect of the 5k wears off).