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Where Taxpayers and Advisers Meet

Personal allowance / dividends / additional income

Nsandy20
Posts:6
Joined:Thu Mar 19, 2020 8:42 pm
Re: Personal allowance / dividends / additional income

Postby Nsandy20 » Sun Mar 29, 2020 4:39 pm

Thank you for those calculations.

So in your opinion do we benefit much from the property income (If we have no dividends) so for example the 20/21 tax year. My original question was to find out if we are benefitting from the property income or not as it’s reducing the PA? Is it clear how much of the property income is profit after tax and PA reductions?

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Personal allowance / dividends / additional income

Postby Lambs » Sun Mar 29, 2020 5:32 pm

N,

You will "not benefit" only if your effective / marginal tax rate exceeds 100%. In other words, for every £1 of additional income, your tax bill rises by £1 or more. The effective tax rate around £100k is punitive - c60% - but it does not go higher than that.

This should be clear from the figures as set out in my previous post for 2020/21: Additional tax cost of £3,765 on additional income (rent only) of £6,276.

You will nevertheless be c£2,500 better off overall, than if you didn't let the property at all.

With regards,

Lambs


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