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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4203
Experience:  FCCA FCMA CGMA ACIS
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I currently earn £45k by way of dividends and £9k by way of salary paye. If I earne

Customer Question

Hi,
I currently earn £45k by way of dividends and £9k by way of salary paye. If I earned an additional 12k/25k/50k paye salary on top of my current base earnings (£45k doc plus £9k wage) how do I understand what tax would be applicable on the additional earnings? The complication arises for me is when bringing in dividend income.
Thanks
S.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello S, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. With dividend income at this level everything will be grossed up for tax and an allowance made for the notional 10% tax on dividends [current tax year]. Your income is 45K [assuming that this sum includes the dividend tax credit] + 9K = 54K. Deduct 10.6K [personal Allowance] leaves 43.4K exposed to income tax. That is 31785 @ 20% [6357] and the balance @ 40% [4646], total tax bill 11032. From this you deduct any tax paid by your employer through PAYE plus the notional dividend tax credit to leave the actual sum owing to HMRC at the year end. In your case any additional salary will be taxable at 40%, but the PAYE tables will only operate on your earned income unless your tax code is depressed to take account of your substantial dividend income. All in all I suspect that you will be faced with a tax bill at the year end. I do hope that my reply has been of assistance. Please follow up on this thread if there something you do not understand.
Customer: replied 1 year ago.
Sorry my net dividends recieved are £45k, also as per my original question if I was going to take additional salary (on top of £9k) of 12k or £25k or £50k how much extra tax will be due on those amount, 40%??
Expert:  bigduckontax replied 1 year ago.
Correct, any additional salary will be taxed at 40% and if your total income exceeds 100K you will loose your personal allowance at a pound for every two quid over 100K. Your dividend income grossed up is 50K, so that's another 2K to add to your tax bill, sorry. Extra income as per your question would add 4.8K, 10K and 20K respectively and if the last then you might be in danger of breaching the 100K income level, see above.