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TonyTax
TonyTax, Tax Consultant
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If I earn £45 k in divends, and am a high rate tax payer, if

Resolved Question:

If I earn £45 k in divends, and am a high rate tax payer, if i put £16k into a cash ISA does that mean i don't need to pay tax on 16k of the dividends which will be paying the 25% on.

I get £85,000 SALARY and £45,000 dividends on top. I declare the dividend on my tax return at 45k, but if i were to out in my maximum isa cash allowance of 16k into an isa would i then reduce the tax liability on the 45k by 16k ?

Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

I'm afraid that it doesn't. You will still have the higher rate tax liability to the extent that the dividends are within the higher rate tax bands. Based on your income details all the dividends are chargeable at 32.5% on the gross dividend of £50,000 less the notional 10% tax credit which equates to 25% of the net dividend of £45,000.

An ISA is simply a wrapper which shields income and capital gains generated by the investments within it from income tax and capital gains tax.

I hope this clarifies your position but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15884
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Customer: replied 1 year ago.
Thanks , lastly the figure I got given is 45k. They don't give a certificate , it's marked on my salary as divedend 45k . That's what I got in bank . On tax return do I put down 45k or do I deduct a further 10percent from that , and say I got 41k
Expert:  TonyTax replied 1 year ago.
In your tax return you put £45,000, the cash sum you received. By rights you should be given a dividend voucher.

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