Tax advice please

[glennjamin]

Good Evening.
I am in fortunate position of being given a special dividend from share. Dividend is £3.55 per share I have 10,000 shares it is a nice amount, but I'm concerned about tax liability ? Will I be heavily taxed or is there away to offset the amount ? CGT ? Help please

[Mr Pointy]

I think you're a bit stuck unless you are holding them in an ISA; is there any way you can transfer them into one before the dividend is paid? CGT isn't an issue but the proceeds will form part of your taxable income, less £1000 alowance (I think).

[Eric Mc]

Dividend income is taxable as normal income, not as a Capital Gain. The first £2,000 of dividend income is tax free. Dividends above £2,000 are taxable at 7.5% (basic rate) and 32.5% (higher rate).
To find out how much tax you will have to pay, you need to know how the dividend is split between the basic and higher rate bands. You can only do this by combining all your income together ( dividend, salary, pension, interest. rental income etc).

To notify HMRC of the tax you have to pay on the dividend, you need to register for Self Assessment and submit all the above income data to HMRC on a tax return for the relevant tax year.

[glennjamin]

Thank you gives me a starting point to work from

[red_slr]

Do you have any say on when the divi is paid?

[glennjamin]

No it's a Pennon dividend. Havent advised date yet.

Edited by glennjamin on Tuesday 8th June 17:14

[shopper150]

glennjamin said:

No it's a Pennon dividend. Havent advised date yet.

Edited by glennjamin on Tuesday 8th June 17:14

That's a stonking return!! Are you holding the stock in an ISA

[NickCQ]

Given that the special div is funded by the disposal of a business unit, the share price will fall c. 30% (£3.55 / £11.10) in early July after it goes ex div and the cash is paid out. I would be looking to realise that loss and find another gain to realise to get a CGT shield.

[NickCQ]

Just remembered this thread and wanted to see what was happening with the ex div date approaching.

My comment above was actually wrong - simultaneous with the special div they are doing a 3 for 2 share consolidation. What this means for tax I have no idea - on an economic basis there is no gain / loss as you replace 100 of shares with 33 of cash and 66 of shares, but whether these gains and losses can be offset against each other I don't know. The share price shouldn't move (ceteris paribus), but you will have fewer shares.

https://www.pennon-group.co.uk/sites/default/files...

[glennjamin]

NickCQ appreciate your thoughts can't decide which is better option take the dividend in cash or take the reinvestment option of having shares ? But as price will drop after dividend paid will have instant loss of £3.55 on new shares given... Your thoughts ?

[NickCQ]

glennjamin said:

NickCQ appreciate your thoughts can't decide which is better option take the dividend in cash or take the reinvestment option of having shares ? But as price will drop after dividend paid will have instant loss of £3.55 on new shares given... Your thoughts ?

I think you need to figure out the tax position, because on the face of it you appear to have a gain and a loss that cannot be offset against each other. Probably take enough cash to pay whatever tax you need to pay then reinvest the rest? That's assuming you like Pennon stock at the prevailing market price of course. If you wouldn't buy it at this price then you should probably sell the lot.