Divvie tax calculation update

[pr1]

ok now i've confused myself

let's say higher rate tax threashold is 43k for the sake of detail

what if you were paid £43k salary and £5k dividends - what would the dividends be taxed at (with your current understanding)?

and what about 43k sal and 6k dividends

[The Spartan]

I'm tempted to say yes, but it obviously depends on the actual legislation. Also, based on the same article, the allowance for tax-free interest (first 1k) seems to be in doubt.

No problem, that's the way I calculated based on the article itself as the 5K can only be used against dividend income.

[northernladuk]

Was there a definitive statement based on publish facts or is it just more assumptions and the message is carry on waiting until we do know?

[jamesbrown]

ok now i've confused myself

let's say higher rate tax threashold is 43k for the sake of detail

what if you were paid £43k salary and £5k dividends - what would the dividends be taxed at (with your current understanding)?

and what about 43k sal and 6k dividends

In the new scenario, the 5k is zero-rated, regardless of your marginal rate. Thus, you would pay no additional tax on the 5k in your first example. In the second example, you'd pay higher rate tax (32.5%) on 1k, i.e. above the 5k, zero-rated, amount. However, this example is not particularly illuminating, because 43k uses up your lower rate band anyway. A more illuminating example would be a 38k salary and a 10k dividend. In the new scenario, 5k would be taxed at 32.5%, instead of 7.5% (i.e. had this been an allowance).

[jamesbrown]

Was there a definitive statement based on publish facts or is it just more assumptions and the message is carry on waiting until we do know?

It's "guidance" from the Treasury. Take that for what it's worth. There are no definitive statements other than the legislation.

[The Spartan]

The example they provided was utter tulip

[drumtochty]

HMRC version, Dividend Allowance Factsheet just published.

https://www.gov.uk/government/public...ance-factsheet

[mudskipper]

HMRC version, Dividend Allowance Factsheet just published.

https://www.gov.uk/government/public...ance-factsheet

OK, so that says the same. It counts towards your tax bands.

[AtW]

So it's even worse than people were LEAD TO BELIEVE when Osborne made the speech?

Big surprise

[jamesbrown]

So it's even worse than people were LEAD TO BELIEVE when Osborne made the speech?

Big surprise

Well, you could say it's somewhat worse than the best case scenario we'd hoped for Seriously, though, all of this needs to be placed in context. It may remove some opportunities for tax planning, but that is hardly the reason that most of us operate through a company (or even one of the important reasons). When you factor in the other changes happening between now and 2020, including CT @ 18%, a 12.5k allowance and a 50k higher rate threshold, the overall differences between now and 2020 will be absolutely negligible for most of us. This hardly changes the landscape. What could change the landscape, not only in terms of tax and administration but how we choose clients/contracts and run our businesses, is the IR35 review and the expenses changes.