Net dividend vs. gross dividend

[kate_nz]

I am filling in my first Dividend Declaration, and the template I have has spaces for 'Net Dividend', 'Tax Credit' and 'Gross Dividend'. Can anyone explain what these are?

If, say, the actual amount I paid myself was £2000, is that the net dividend, or the gross dividend? How do I work out the tax credit?

(Sorry if this question has been answered before - I did a search and couldn't find anything that helped.)

kate_nz

[CarterUK]

The £2000 you paid yourself is the net dividend. You need to add Corporation Tax onto that amount to get the gross dividend (I think it's currently 20%). The Corporation Tax acts as the Tax Credit.

[ASB]

I am filling in my first Dividend Declaration, and the template I have has spaces for 'Net Dividend', 'Tax Credit' and 'Gross Dividend'. Can anyone explain what these are?

If, say, the actual amount I paid myself was £2000, is that the net dividend, or the gross dividend? How do I work out the tax credit?

(Sorry if this question has been answered before - I did a search and couldn't find anything that helped.)

kate_nz

Tax credit is a notional thing and not related to CT paid. A dividend "comes with" a tax credit of 10%, this satisfies either nil rate or standard rate income tax for the recipient. If the recipient is a higher rate taxpayer then the rate is 32.5% of the gross (22.5% after the credit or 25% of the net). If the recipient is not a uk tax payer there is no longer anyway of reclaiming the tax credit.

The actual figures for the 2000 are 2000, 222.22, 2222.22.

[Gonzo]

The £2000 you paid yourself is the net dividend. You need to add Corporation Tax onto that amount to get the gross dividend (I think it's currently 20%). The Corporation Tax acts as the Tax Credit.

This isn't quite correct.

The tax credit is a notional amount unrelated to the amount of corporation tax paid. See ASB's answer for how this affects you.

Yes, it is complicated that a 10% tax credit satisfies the tax liability for a 22% tax payer. It was done so that people that can reclaim tax get less back. Thanks Gordo.

[ASB]

Yes, it is complicated that a 10% tax credit satisfies the tax liability for a 22% tax payer. It was done so that people that can reclaim tax get less back. Thanks Gordo.

I must say that is precisely what I thought when they did it. But the rates applied are such that from the income tax perspective it only affects non UK taxpayers (i.e. my kids can't get it back anymore). The real killer though is institutional funds can't reclaim. If I recall correctly it was described as broadly neutral. Since it has pulled in 30bln I'd hate to think what the impact of something designed to increase the take will be.

[Gonzo]

I must say that is precisely what I thought when they did it. But the rates applied are such that from the income tax perspective it only affects non UK taxpayers (i.e. my kids can't get it back anymore). The real killer though is institutional funds can't reclaim. If I recall correctly it was described as broadly neutral. Since it has pulled in 30bln I'd hate to think what the impact of something designed to increase the take will be.

That's a point.

Because it is "notional" that means that it is not reclaimable at all (by people with low incomes, stocks and shares ISAs, pensions etc.)

I really should think more before I post.

[thunderlizard]

the actual amount I paid myself was £2000

"The actual amount my company paid its shareholders" I hope,

tl

[kate_nz]

Thanks for your replies. ASB, if the notional tax is 10%, shouldn't the figures then be 2000, 2200 and 200?

"The actual amount my company paid its shareholders" I hope

Erm, yes!

[ASB]

Thanks for your replies. ASB, if the notional tax is 10%, shouldn't the figures then be 2000, 2200 and 200?

No. Because that wouldn't be 10% would it? It's 10% of the gross - this often trips people up as they calculate the amount of dividends they can have before moving into the higher rate tax bracket.

[kate_nz]

Got it. Thanks.