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Interesting Find in Budget Docs from HMRC re Divi Tax Rate
Originally posted by TheCyclingProgrammerView Post
No, not sure how you got that from what I posted.
Take a typical contractor who takes the normal £8k salary/£35k dividend split up to the higher rate threshold. The £8k salary and first £3k of dividends will be covered by the personal allowance, the first £5k of taxable dividends will be covered by the dividend allowance and the rest will be taxed at 7.5% (£2025). All other things being equal, the £3k reduction of the dividend allowance means you'll be paying 7.5% on an extra £3k (£225) though the increase in personal allowance will cancel some of that out.
If you're on a full time salary of say £43k and have some dividends from other investments, then currently you can still get £5k in dividends with no other tax due. When this is reduced, as a higher rate tax payer you'll be paying 32.5% on an extra £3k (£975).
Sorry I read the original as you never get to higher rate dividend tax rate if you don't have other income already in the higher tax rate bracket. My bad your explanation here is correct. Thanks!
This default font is sooooooooooooo boring and so are short usernames
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