Tax credit

Shareholders receiving dividend income also receive a tax credit. Those taxed at the basic rate have no further tax to pay on their dividend income while those who pay income tax at the higher rate have to pay extra tax on their dividend income.

From 6th April 1999 there was a shake up in how tax credits work. Private shareholders when they receive their dividend cheque now receive attached to it a 10 tax credit.

The 10 tax credit -

If youre a non taxpayer you wont be able to reclaim anything.

If you're a basic rate taxpayer there'll be no further tax to pay.

If youre a higher rate taxpayer there will be extra tax to pay. Youll be required to pay excess liability - this is equivalent to 25 of the net dividend thats 20 of the gross dividend payout.

Capital Gains tax CGT

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2009-02-17 00:00:00 © Moneyextra.com