Personal tax

ddavis

I have my exam a week thursday and havent made it past chapter 4. Its just not going in my head.
When i think i understand something and apply it to a question the answer is wrong.

How do you know when to apply the deduction on dividends from the tax liability.. as the examples i was using seem to one minute you have to apply it and the next question its not applied. and i cannot seem to figure out what triggers the deduction.. i am at my wits end with it and getting confused.
and why if you base your tax dividends calculations on for example 40% so 32.5% for dividend as youve used the basic rate band why is the deduction from tax liability of dividend then calculated at 10%( in my book it says to use the 10% if the basic rate band hasn't been used) and the interest at 20%

All the above could just be me not understanding anything,, so sorry if it doesn't make sense.

CeeJaySix

ddavis, your question is a little confused, maybe try re-wording it when you're a little less stressed or reproducing a question you are stuck on from the book?

I am guessing the difference in your first question is whether you are asked for the tax LIABILITY or the tax PAYABLE. For the liability, you work out how much tax is due. For the payable, you carry on and deduct tax already paid (ie. PAYE, bank interest, dividend tax credits).

For the second question, the dividend tax credit is always 10%, regardless of what the dividend is actually taxed at. So if you're a higher rate taxpayer (40%), you will pay tax on your dividends at 32.5%, as you say. You will still however only get a 10% deduction from the tax liability.

Hope that helps.

ddavis

sorry it was a bit of a rant.. thank you for your advice.