Dividend Taxation Calculation

[TEKNOPUG]

Trying to get my head around the calculation of dividend tax, as I've seen a couple different ways of it being done and the results seem to vary considerable.

I've used the following figures for simplicity. Both for 14/15 tax year. Which is correct and why?

PAYE 20000
Net Dividends 40000
Gross Dividends 44444
Taxable Income 64444

PAYE tax @ 0% 10000 0
PAYE tax @ 20% 10000 2000

Upper Limit 31865
Personal Allowance 10009
Taxable Divs @ 32.5% 22570 7335
Less 10% Taxable Div 22570 -2257

Total Tax Payable 5078

OR

PAYE 20000
Net Dividends 40000
Gross Dividends 44444
Taxable Income 64444

PAYE tax @ 0% 10000 0
PAYE tax @ 20% 10000 2000

Upper Limit 31865
Personal Allowance 10009
Taxable Divs @ 10% 21865 2187
Taxable Divs @ 32.5% 22579 7338
Less Gross'd Div 4444 -4444

Total Tax Payable 7080


Please excuse garbage formatting, life is too short to try and make tables work on here...

[sumo69]

The tax on salary is £2k.

Dividends - you have £21865 left of the basic rate band and you have £44444 gross dividend, so tax arises on £22579 @ 32.5% = £7338.18 less the tax credit of £2257.90 leaving £5080.28 to pay.

David

[TEKNOPUG]

sumo69 said:

The tax on salary is £2k.

Dividends - you have £21865 left of the basic rate band and you have £44444 gross dividend, so tax arises on £22579 @ 32.5% = £7338.18 less the tax credit of £2257.90 leaving £5080.28 to pay.

David

Thanks. That was my understanding too. My accountant seems to think that it should be calculated the second way.

[TEKNOPUG]

It looks like that haven't included the PAYE and 10% rate back in as deductions.

[MW-M5]

http://www.itcontracting.com/calculators/dividend-...

put your figures in here

[Eric Mc]

That'll give you the 2015/16 results - which will be very different to those for 2014/15.

[MW-M5]

Apologies, Eric is right. Try this one...

http://www.itcontracting.com/calculators/dividend-...