Personal Tax - Dividends
JaneF
Registered Posts: 14 New contributor 🐸
Hi All,
I was wondering if anyone would be able to explain why when calculating income tax liability you deduct the tax credit for dividends in some cases? I can't seem to follow the explanation in the BPP textbook and i am really struglling with this!
Any help would be appreciated,
thanks
Jane
I was wondering if anyone would be able to explain why when calculating income tax liability you deduct the tax credit for dividends in some cases? I can't seem to follow the explanation in the BPP textbook and i am really struglling with this!
Any help would be appreciated,
thanks
Jane
0
Comments
-
Dividends are a distribution of post-tax profits from a limited company. These are paid net of tax and for tax purposes are grossed up (x100/90). The 10% difference is a tax credit (a notional tax which satisfies tax at the basic rate).
The higher rate tax for dividends is 32.5%. Due to the tax credit any amount of dividends that falls into the higher rate the difference of 22.5% (i.e. 32.5 - 10) is due.Regards,
Burg0
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