Personal Tax 2015, Sample Assessment Task 4, Dividends!!!

NazKhan

I am incredibly confused as to why the answer for additional dividend tax payable is 123.75 and not 178.75

Salary after allowance is 29,805 by the way.


Income Income Received Tax Deducted Additional Payable
ISA
Savings 856 214 0
Dividends 1314 146 123.75


I've calculated an extended version to see if I'm missing something...


Total Other Savings Dividends
Employment 29,805 29,805
Savings 1,070 1,070
Dividends 1,460 1,460

Net (No PA) 32,335 29,805


Income Tax:
29,805 x 20% = 5,961
1,070 x 20% = 214
910 x 10% = 91
550 x 32.5% = 178.75

Tax Liability = 6,444.75

Less Deducted:
1,460 x 10% = 146
1,070 x 20% = 214

Tax Payable = 6,084.75

DaveyBoy

Hi NazKhan,

If you scoll down the forum page and look for the thread called Personal tax task 1.4 HELP PLEASE I have already answered this question for somebody.

DaveyBoy

Here you go, I have copied and pasted it for you.



Employment Income £29805 at 20% = £5961 (no additional tax payable)

Savings Income £1070 at 20% = £214 (no additional tax payable)

Dividend Income £910 at 10% = £91

(£31785 basic band is hit)

Dividend Income £550 at 32.5% = £178.75

So Dividend Income is where the variance lies, in total you should be paying £267.75, whereas you have actually paid £146.00, difference between the 2 amounts £123.75 which is the additional amount payable to make up the difference.

Hope this helps

NazKhan

Right ok that sort of makes sense I'm guessing because it's over the tax bracket , however when I've looked through the Kaplan and Osbourne books how come they don't ask you to do that (- this 10%)

NazKhan

For the exam when calculating tax liability and tax payable will I always minus this 10% from any dividend income which goes over the tax bracket? always bringing it down to 22.5%

NazKhan

It's just clicked I get it now. Thank you