CH4 - The Taxation of Dividend Income

Question 1

Dividends

Dividends are taxed after ?

Answer 1

non-savings income and interest.

Question 2

Dividends

Taxable dividends falling within the dividend allowance of £1,000 are taxed at the ?

Answer 2

dividend nil rate.

Question 3

Dividends

Dividends in excess of the dividend allowance are taxed at the dividend rates as followed: ?

Answer 3

• 8.75% in the basic rate band
• 33.75% in the higher rate band
• 39.35% above the higher rate limit

Dividends within the allowance utilise the BRB and/or HRB as normal.

The third column in the proforma is used to help us with the calculation.

Question 4

Stock/Scrip Dividends

A taxpayer may be offered a stock dividend (also called a scrip dividend) whereby they will be given ?

Answer 4

shares rather than cash.

The cash foregone will still be treated as a dividend and taxed in the normal way.