Tax on dividends

JodieR

I'd manually worked out a client's tax refund the other day but when I entered the info into Ftax it's calculated a different amount. She's a higher rate tax payer (employment income) with £1000 dividends.

Am I just having a 'late night in January moment' or is the correct way to calculate the tax liability to say that the (grossed up) dividend income should be the 'top slice' and therefore (after PA) the salary up to £37400 would be taxed at 20%, the salary above that at 40% and the dividends at 32.5%?
Ftax has calculated the Dividends at 10%, then £36289 (ie £37400 less £1111) salary at 20% and the remaining salary at 40%.

*confused*

Bluewednesday

Definitely employment income, then non employment then dividend income, not quite sure why it is doing that?

JodieR

Well maybe I over-simplified the scenario... part of her employment income was a taxable redundancy payment so that was entered in box 5 of the additional information pages. I've just tried including the box 5 figure on the employment pages instead and then it does calculate it as I did.
So does redundancy pay come after dividends when calculating tax or has Ftax got that wrong?

hunterhouse

Jodie,

In case you have not sorted-out this query...

the scenario, as explained originally, did over-simplify the situation. You are correct that the usual order is non, savings & dividend income but - where there is a taxable "redundancy payment" involved - this becomes the top-slice.

I've never used Ftax, but I'm quite impressed!

Good luck...the late nights in January are almost done!

JodieR

well thank you very much for clarifying - definately my 'new thing' learned for today!

stevo5678

Hi, I agree with your initial calculations IE dividends last. Just making sure you have taken into a/c the £30000 tax free redundency limit?