Salary = £12,000,
Net dividend = £80,000,
Other income = £0
Tax code = 747L,
Tax year = Fiscal Year 2011/2012.
- The gross dividend is £88,888, making your total gross income £100,888
- You are a higher rate tax payer (limit is £35,000). Extra tax is payable on dividends
- Because your income is above £100,000) your tax allowance has been reduced from £7,470 to £7,020.
- £58,868 of your gross dividend income is subject to further tax.
- The extra tax to pay is £13,245 (16.6%) of net dividend).
| Band | Rate | Lower Limit | Upper Limit | Tax |
|---|---|---|---|---|
| Basic rate | 10% | £0 | £35,000 | £0 |
| Higher rate | 32.5% | £35,000 | £150,000 | £13,245 |
| Additional rate | 42.5% | £150,000 | - | £0 |
| Total Tax: | £13,245 |
-
Notes:
Gross dividend = (10/9)*Net dividend.
Taxable gross income = Gross salary + other income + grossed up dividend - tax free allowance.
Dividends are taxed at the higher rate of 32.5% for income up to £150,000 and at the additional rate of 42.5% thereafter. The first 10% is already paid via a tax credit.
The additional tax due is paid as part of your annual tax return.
Further taxation will be due on any 'other income' as part of your annual self assessment.
TAX INCREASE FROM APRIL 2016: From 2016/2017 the dividend tax regime is changing, with dividend taxes being increased by 7.5%. It is likely that you will have to pay more tax. To calculate your increase in dividend taxes from April 2016 onwards use our dividend tax changes increase calculator.
Solutions for Contractors:
Check your IR35 Status for FREE
Use IR35 Shield to check your status NOW!
