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Going into higher rate dividend band

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    Going into higher rate dividend band

    I may need to take out a slightly higher dividend this year (an extra £6k) and go into the higher-rate dividend tax band.

    Apart from paying tax at 32.5% on the additional dividend rather than 7.5%, are there any disadvantages? Is the mere fact that I'm in the higher divi bracket have any repercussions?

    thanks

    #2
    Nope. You're just get hung up on the figures that's all. Don't let the tax dog wag the tail. Take what you need, live your life, pay the tax and off you go... Oh and hang up the tin foil hat on the way out
    'CUK forum personality of 2011 - Winner - Yes really!!!!

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      #3
      If your income goes over the £50K bracket, don't forget about the child benefit tax charge (in you are claiming any - as some of this could be clawed back on your self assessment).

      We're all ears!

      Comment


        #4
        What NLUK said.

        If you make lots of money and want it in your hands, you're going to pay fairly sizeable amounts of tax. There are ways to avoid that tax, but most of the legal ones revolve around not getting that money into your hands to spend right now (eg putting it into a pension/leaving it in the company).

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          #5
          Personal Savings Allowance

          The Personal Savings Allowance (amount of tax free savings income you can receive each year) also drops from £1,000 to £500 when you go into higher rate band.

          https://www.gov.uk/government/public...ings-allowance

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            #6
            If you're claiming childcare vouchers your tax free amount changes if you become a higher rate taxpayer

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              #7
              Originally posted by pr1 View Post
              If you're claiming childcare vouchers your tax free amount changes if you become a higher rate taxpayer
              The childcare voucher limits are based on 'relevant earnings' (effectively salary + taxable benefits).

              It doesn't include dividend income.
              We're all ears!

              Comment


                #8
                Originally posted by ContractorBanking View Post
                I may need to take out a slightly higher dividend this year (an extra £6k) and go into the higher-rate dividend tax band.

                Apart from paying tax at 32.5% on the additional dividend rather than 7.5%, are there any disadvantages? Is the mere fact that I'm in the higher divi bracket have any repercussions?

                thanks
                One thing to watch is that they won't just ask for the tax you owe, but tax for the next year too. So if you take a lot or you can end up in a tax death spiral. You have to declare extra dividends the next year to pay the tax that you wouldn't owe if you didn't have to declare the dividends to pay the tax in advance.

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                  #9
                  But if it's only a one-off that you are going to take this level of income, can you ask to reduce the following year's POA in advance.

                  Just remember to do this, or you'll be waiting longer for HMRC to give you your money back, if you are planning on taking less taxable income next year.
                  We're all ears!

                  Comment


                    #10
                    Originally posted by Louisa@AardvarkAccounting View Post
                    But if it's only a one-off that you are going to take this level of income, can you ask to reduce the following year's POA in advance.

                    Just remember to do this, or you'll be waiting longer for HMRC to give you your money back, if you are planning on taking less taxable income next year.
                    Don't HMRC pay interest if you have paid more tax than is due?

                    Comment

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