Dividend help please

Rachel

Hello

I have a client who has gone over the £32,500 threshold on their dividends. Effectively this is 0% tax due to the 10% tax and credit of 10%.

Can someone help me with the remainer. Say another £30,000 I understand that the rate is 32.5% Is there any tax credit on this. Or is it 32.5% on the whole lot or below 25%

I have looked at http://www.hmrc.gov.uk/taxon/uk.htm where it states "you owe only 25 per cent of the dividend paid to you after the tax credit has been taken into account."

Sorry if I am sounding silly but I have never dealt with dividends over the 10% threshold and the client is not yet on my list to run it through the calculations.

Thank you for your help

AK002

Sounds like 25% of the net dividend received to me (over £32,5k).

Someone will confirm or change, I've not worked in practice for a while now.

Monsoon

The effective rate of tax on higher rate dividends is 25% of the Net dividend received.

It's taxed at 32.5% on the gross. Take off the 10% tax credit attached, and you end up with 25% of the net received.

So effectively, even though the headline tax rates are 10% and 32.5%, they are actually 0% and 25% for all intents and purposes (with the exception of the gross of course counting to total income and the related thresholds).

Rachel

Thanks so much.