Dividends and tax credits
Discussion
vixpy1 said:
Typical, you need an accountant, and he's busy on the sexual harrasment thread.
As long as you are a basic rate tax payer receiving a dividend results in no additional tax liability.
Sorry it took a while to answer your question I had to go for a bathroom break after the sexual harassment thread
Jaglover said:
Typical, you need an accountant, and he's busy on the sexual harrasment thread.
As long as you are a basic rate tax payer receiving a dividend results in no additional tax liability.
Sorry it took a while to answer your question I had to go for a bathroom break after the sexual harassment thread
That's a politician's answer.....the right answer to a different question
Jaglover said:
Typical, you need an accountant, and he's busy on the sexual harrasment thread.
As long as you are a basic rate tax payer receiving a dividend results in no additional tax liability.
Sorry it took a while to answer your question I had to go for a bathroom break after the sexual harassment thread
Um.. So does that mean i can claim back the 10% on the P/a amount ?
Smartie said:
Um.. So does that mean i can claim back the 10% on the P/a amount ?
No, the 10% tax credit is a notional tax credit offset against the tax due on the dividend only, it cannot result in a tax refund.
didnt i say that?
Indeed, but i was just trying to prove/disprove the well known theory that 'Smatie has the answer'
No tax to claim back. The 10% tax amount shown is a "phantom tax" - it doesn't really exist. It isn't really deducted by the company at source and it is never paid over to the Inland Revenue. All it does is move the tax payer's income levels more rapidly towards the higher tax bracket.
The "old" system was that the tax credit attached to the dividend was at 20% and was REAL tax. It really was deducted by the company and paid over to the Inland Revenue. The individual taxpayer could then claim that tax back if their income for the year was so low that they weren't actually liable yo Income Tax. This system was abolished in Gordon Brown's first budget in 1998.
The "old" system was that the tax credit attached to the dividend was at 20% and was REAL tax. It really was deducted by the company and paid over to the Inland Revenue. The individual taxpayer could then claim that tax back if their income for the year was so low that they weren't actually liable yo Income Tax. This system was abolished in Gordon Brown's first budget in 1998.
Jaglover said:
Um.. So does that mean i can claim back the 10% on the P/a amount ?
No, the 10% tax credit is a notional tax credit offset against the tax due on the dividend only, it cannot result in a tax refund.
Please note that's down to Gordon Highwayman Brown....
Before the Scottish Grabber came along, tax credits were reclaimable if you weren't due to pay tax.....
Eric Mc said:
No tax to claim back. The 10% tax amount shown is a "phantom tax" - it doesn't really exist. It isn't really deducted by the company at source and it is never paid over to the Inland Revenue. All it does is move the tax payer's income levels more rapidly towards the higher tax bracket.
So what your saying Eric is that i, ahem.. the theoretical person, never paid any tax in the first place?
Or is it still 20%, and I paid 10% and the other 10% is the tax credit?
First comment is correct.
Under the old system, if a company paid dividends to its shareholders, every calender quarter, it had to fill in a form (the CT61Z) and physically write out a cheque payable to the Inland Revenue made up of the total of all the tax deducted on the dividends that were paid in the quarter. The company was allowed to look on that tax payment as a form of advance payment of its final year end Corporation Tax bill (it was called Advance Corporation Tax or ACT).
The individual receiving the dividend treated the tax deducted on their dividend and paid by the company to the Inland Revenue as a part-payment of their ultimate personal Income Tax liability. If they pnly paid tax at the basic rate of tax, they had nothing else to pay. If they paid tax at 40%, they had to pay an additional 20% to the Revenue. If they were not liable to Income Tax, they could claim the original tax deducted on the dividend back from the Revenue.
In the current system, the company paying the dividend pays NOTHING to the Inland Revenue. Therefore, it has no Advance Corporation Tax. Secondly, as nothing has really been paid, a taxpayer cannot claim any tax back since Gordon Brown never had it in the first place. As explained earlier, if the taxpayer only pays tax at 10% or 22%, they are not required to pay any additional tax in respect of the dividends received. If they are higher rate tax payers, even though the higher rate of tax is 40%, dividends taxed at the higher rate are subject to a top rate of tax at only 32.50%
Simple, isn't it
Under the old system, if a company paid dividends to its shareholders, every calender quarter, it had to fill in a form (the CT61Z) and physically write out a cheque payable to the Inland Revenue made up of the total of all the tax deducted on the dividends that were paid in the quarter. The company was allowed to look on that tax payment as a form of advance payment of its final year end Corporation Tax bill (it was called Advance Corporation Tax or ACT).
The individual receiving the dividend treated the tax deducted on their dividend and paid by the company to the Inland Revenue as a part-payment of their ultimate personal Income Tax liability. If they pnly paid tax at the basic rate of tax, they had nothing else to pay. If they paid tax at 40%, they had to pay an additional 20% to the Revenue. If they were not liable to Income Tax, they could claim the original tax deducted on the dividend back from the Revenue.
In the current system, the company paying the dividend pays NOTHING to the Inland Revenue. Therefore, it has no Advance Corporation Tax. Secondly, as nothing has really been paid, a taxpayer cannot claim any tax back since Gordon Brown never had it in the first place. As explained earlier, if the taxpayer only pays tax at 10% or 22%, they are not required to pay any additional tax in respect of the dividends received. If they are higher rate tax payers, even though the higher rate of tax is 40%, dividends taxed at the higher rate are subject to a top rate of tax at only 32.50%
Simple, isn't it
Eric Mc said:
The "old" system was that the tax credit attached to the dividend was at 20% and was REAL tax. It really was deducted by the company and paid over to the Inland Revenue. The individual taxpayer could then claim that tax back if their income for the year was so low that they weren't actually liable yo Income Tax. This system was abolished in Gordon Brown's first budget in 1998.
Which is where the £5bn 'raid on pension funds' that the papers talk about comes from. Previously the pension funds could claim this tax back.
Jaglover said:
The "old" system was that the tax credit attached to the dividend was at 20% and was REAL tax. It really was deducted by the company and paid over to the Inland Revenue. The individual taxpayer could then claim that tax back if their income for the year was so low that they weren't actually liable yo Income Tax. This system was abolished in Gordon Brown's first budget in 1998.
Which is where the £5bn 'raid on pension funds' that the papers talk about comes from. Previously the pension funds could claim this tax back.
Winds me up no end when Unions and New Labia bang on about the "pensions crisis" and closure of final salary schemes being the fault of big business. When Gordon the Grabber is removing £5bn from the pension pots of private sector workers every year!
Like most tax changes, there are two viewpoints.
The idea that companies didn't deduct tax at source on the original dividends meant that, in theory, they could pay out more in the way of the dividend amount to the shareholders, including the pension funds. So, according to Gordon, his change had a "tax neutral" effect.
The other "positive" (according to Gordon) was that by eliminating the need for companies to fill in these quarterly tax return forms, he was easing the administrative burden on businesses, thus saving them money, thus , in theory, allowing them to pay bigger dividends.
In Gordon's mind, having the full dividend "now" rather than waiting for the Inland Revenue to refund tax to you or conversely, waiting for you to pay additional tax, not to mention the Inland Revenue having to administer ACT and tax refunds was a big improvement.
I'm not defending GB. God knows, he's dome enough other things to REALLY annoy me but this was not one of them.
The idea that companies didn't deduct tax at source on the original dividends meant that, in theory, they could pay out more in the way of the dividend amount to the shareholders, including the pension funds. So, according to Gordon, his change had a "tax neutral" effect.
The other "positive" (according to Gordon) was that by eliminating the need for companies to fill in these quarterly tax return forms, he was easing the administrative burden on businesses, thus saving them money, thus , in theory, allowing them to pay bigger dividends.
In Gordon's mind, having the full dividend "now" rather than waiting for the Inland Revenue to refund tax to you or conversely, waiting for you to pay additional tax, not to mention the Inland Revenue having to administer ACT and tax refunds was a big improvement.
I'm not defending GB. God knows, he's dome enough other things to REALLY annoy me but this was not one of them.
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