New tax rate on divs

[Pondlife]

The rates available for dividends for the 2008-09 and 2009-10 tax years are the 10 per cent ordinary rate and the 32.5 per cent dividend upper rate. For the 2010-11 tax year, as well as these rates there is a new dividend additional rate of 42.5 per cent.

Is the last paragraph here

Does anyone know what this applies to?

...and yes obviously I could ask my accountant.

[Emigre]

I expect this is related to the introduction of the new 50% rate band for those with income above 150k.

Happy new (tax) year.

[LisaContractorUmbrella]

It's the equivalent of the 50% tax rate for PAYE - so divs over £150k will be taxed at 42.5%

[Pondlife]

Thanks all.

(Un)fortunately this doesn't apply to me then.

[RSoles]

Damn, there's a tax I'd love to pay......

[Nixon Williams]

Note that the 42.5% rate applies to the GROSS dividend.

Example -

1. Assuming that your income exceeds £150,000!

2. A dividend of £900 is grossed up to £1,000

3. This dividend is taxed at 42.5%, ie £425, less the £100 tax credit leaves extra tax of £325 to pay.

4. This compares to extra tax of £250 if your gross income exceeds the higher rate threshold but is below £150,000.

Also remember that if your gross income exceeds £100,000 then the personal allowance (£6475 in 2010/11) will be gradually withdrawn, losing it completely when your income exceeds £112,950

Alan

[escapeUK]

At which point id leave the money in the company and draw it out in years when Im not earning so much. Think of the interest (ie the money saved by not paying such ridiculous tax)