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Where Taxpayers and Advisers Meet

Savings and Dividend income

SuperSpurs106
Posts:24
Joined:Wed Jun 15, 2022 3:25 pm
Savings and Dividend income

Postby SuperSpurs106 » Wed Jun 15, 2022 3:30 pm

Hi

I have a client with savings income of £2,000 and dividend income of £20,000.

How much personal allowance would the client have left to use against his dividend income in this scenario?

Would the PSA of £1,000 be used against the savings allowance first, then £1,000 of the personal allowance leaving remaining personal allowance of £11,570.

Or, is the personal allowance used first (£2,000) leaving £10,570 remaining (and effectively rendering the PSA useless)?

TIA

JRG
Posts:425
Joined:Wed Feb 03, 2010 4:40 pm

Re: Savings and Dividend income

Postby JRG » Wed Jun 15, 2022 11:58 pm

From my own experience, and assuming your client is a basic rate taxpayer, the £1,000 savings allowance is deducted from the total savings amount, and the £2,000 dividend allowance is deducted from the total dividends amount.
Therefore £1,000 of savings and £18,000 of dividends will be charged at the appropriate rates.
If your client is a higher rate taxpayer the savings allowance is reduced to £500.

Jholm
Posts:389
Joined:Mon Mar 11, 2019 4:22 pm

Re: Savings and Dividend income

Postby Jholm » Thu Jun 16, 2022 9:04 am

Is this the only income?

If so, allocate all PA to dividends since the interest is within the SRB of £5,000.

Jholm
Posts:389
Joined:Mon Mar 11, 2019 4:22 pm

Re: Savings and Dividend income

Postby Jholm » Thu Jun 16, 2022 9:06 am

PS your tax return software should calculate it as such, in the most beneficial allocation of PA. If it doesn't tell you the tax is £407.25, file by paper.

Assuming this is the only income, of course.

SuperSpurs106
Posts:24
Joined:Wed Jun 15, 2022 3:25 pm

Re: Savings and Dividend income

Postby SuperSpurs106 » Wed Jun 29, 2022 9:45 am

Thank you for that JHolm, that makes sense (although the tax bill would be £475.13 on account of the recent increase in dividend tax rates).

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Savings and Dividend income

Postby robbob » Wed Jun 29, 2022 11:17 am

The golden rule (there may be the odd exception!) is that all taxable investment income must be included on tax return - some peeps wrongly preume that amounts covered by allowances might not need entering or can be reduced for "allowance amount"- it all goes into the pot whether taxed at 0% or whatnot - note even if taxed at 0% that entry can create tax if you are in taper zone to lose pa or pay child benefit tax charge - ie tax doesnt always come as you would expect from dividend alone !! sometimes adding stuff in might even dictate how allowances are taxed so you might even find the amount covered by pa and other stuff taxed if you are a real outlier with income splits.

someone
Posts:726
Joined:Mon Feb 13, 2017 10:09 am

Re: Savings and Dividend income

Postby someone » Fri Jul 15, 2022 6:36 pm

The golden rule (there may be the odd exception!) is that all taxable investment income must be included on tax return - some peeps wrongly preume that amounts covered by allowances might not need entering or can be reduced for "allowance amount"- it all goes into the pot whether taxed at 0% or whatnot - note even if taxed at 0% that entry can create tax if you are in taper zone to lose pa or pay child benefit tax charge - ie tax doesnt always come as you would expect from dividend alone !! sometimes adding stuff in might even dictate how allowances are taxed so you might even find the amount covered by pa and other stuff taxed if you are a real outlier with income splits.
This is specifically 'investment income'? I have about 500GBP of rental income that is fully relieved and I did not put on last years tax return. Do I need to go back and correct it (and include it on this years)?

I think this says I've done it right:
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4434

but perhaps I've misunderstood.

bd6759
Posts:4360
Joined:Sat Feb 01, 2014 3:26 pm

Re: Savings and Dividend income

Postby bd6759 » Fri Jul 15, 2022 8:06 pm

The property allowance is an exemption. If the income is under 1000, it is exempt and does not need to go on the return.

someone
Posts:726
Joined:Mon Feb 13, 2017 10:09 am

Re: Savings and Dividend income

Postby someone » Fri Jul 15, 2022 8:17 pm

Thank you.


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