Dividends

[jpsand]

Hi,

I am due to receive £100,000 in dividends this year - I'm really confused how much I should put aside for my future tax on this amount?

Is the rate 22.5% or 32.5% - this idea of 10% tax credit is really confusing me! How much tax will I pay on the £100k dividend?

Help!!

[Lee Young]

For the purposes of this reply I have assumed that the £100,000 dividend is the gross amount, ie before the notional tax credit, and that all of it will be taxed at the higher rate. In which case the tax bill will be £32,500, of which £10,000 will covered by the notional tax credit - therefore you only have to find the additional 22.5% of the gross amount to meet your higher rate tax liability.

An easier way to work out the higher rate liability is simply to calculate 25% of the NET dividend received (ie the amount you receive after the 10% credit).

If the £100,000 is the net amount, the gross dividend is £100,000 x 100/90, or £111,111.