High Commission of the United Kingdom in Islamabad

Marri
My 120 days gone over today but still waiting

All
Any news from September applicant

Ali
My 60 days are over today and haven't heard anything back yet

sara
Accountant said in April they will start taking tax .,,,and my hubby hv opintmemt with solicter on Tuesday ,,....a

Salma
what i mean is if u earning £1800 or £2000 a month when it goes up to £5000 after this there will be a tax deduction mean if u earning no matter how much your first salary up to £5000 will be tax free after that wont be i cant explain more better as not 100% sure jab goverment change hoga it will be on the main news everywhere so just talk to a solictor rather than this forum

read this
2016/17 on)
Dividend tax (proposals 2016/17 on)

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Last Updated: 09 December 2015
This article explains the workings of the proposed changes to the way in which dividends are to be taxed from 6 April 2016 and features HMRC's examples from its own factsheet with more detailed examples provided by this webservice.

What's New?

Draft legislation was published on 9 December 2015, see Dividends: subscriber guide.

Proposed changes:

From April 2016, notional 10% tax credit on dividends will be abolished.
A £5,000 tax free dividend allowance will be introduced.
Dividends above this level will be taxed at 7.5% (basic rate), 32.5% (higher rate), and 38.1% (additional rate)
Dividends received by pensions and ISAs will be unaffected
Dividend income will be treated as the top band of income.
Individuals who are basic rate payers who receive dividends of more than £5,001 will need to complete self assessment returns from 6 April 2016.
Impact

The proposed changes are aimed to tax small companies who pay a small salary designed to preserve entitlement to the State Pension, followed by a much larger dividend payment in order to reduce National Insurance costs. It appears that the government is anti-small companies, preferring workers to be self-employed.

This measure will have a very harsh effect on those who work with spouses in family companies. A couple could be over £5,000 p.a. worse off.

How does this work?

HMRC has now published its Dividend Allowance Factsheet, a few days after providing the ICAEW with examples of the new dividend tax.

HMRC examples are as follows:

Assuming for 2016/17 a personal allowance (PA) of £11,000
A basic rate (BR) threshold of £32,000
A higher rate (HR) threshold of £43,000
Example 1 and 2

If you have dividend income (dividends held outside of an ISA) of £5,000 or less per year you will pay no tax on your dividends, even if you are a higher rate taxpayer. Your dividends are covered by the £5,000 dividend allowance.

If your total income is less than £11,000 your income is covered by your personal allowance and your dividend allowance is effectively unused.

If your dividend income is received through shares in an ISA, as now, these remain tax-free and the dividend allowance will not affect this income.

Example 3

Non-dividend income of £6,500 and dividend income of £12,000
You pay £187.50 more a year in tax
Income PA BR band
Non-dividend income 6,500 6,500
Dividend 12,000 4,500 7,500
Totals 18,500 11,000 7,500
Less DA (5,000)
Taxed at 7.5% 2,500
Tax due £187.50

Example 4

Non-dividend income of £20,000 and dividend income of £6,000
You now pay £75 more a year in tax
Income PA BR band
Non-dividend income 20,000 11,000 9,000
Dividend 6,000 - 6,000
Totals 26,000 11,000 15,000
Tax on dividend
Dividend in basic rate band 6,000
Less DA (5,000)
Taxed at 7.5% 1,000
Tax due £75
Example 5

Non-dividend income of £18,000 and dividend income of £22,000
You pay t£1,275 more a year in tax
Income PA BR band
Non-dividend income 18,000 11,000 7,000
Dividend 22,000 - 22,000
Totals 40,000 11,000 29,000
Tax on dividend
Dividend in basic rate band 22,000
Less DA (5,000)
Taxed at 7.5% 17,000
Tax due £1,275
Example 6

Non-dividend income of £40,000 and dividend income of £9,000
You pay £50 more a year in tax
Income PA BR band HR band
Non-dividend income 40,000 11,000 29,000
Dividend 9,000 - 3,000 6,000
Totals 49,000 11,000 32,000
Tax on dividend
Dividend in BR/HR band 3,000 6,000
Less DA (3,000) (2,000)
Taxed at 32.5% 0 4,000
Tax due - 1,300
Extending HMRC's examples:

1) Taking the example above but increasing the non-dividend income:

If your non-dividend income is £43,000 and your dividend income is £5,000, no tax is due on your dividend.

2) Basic rate and higher rate comparisons: new rules v old rules

The following examples outline the cost of the new measures to small company owners/investors

2016/17 example: the dividend allowance is within your basic rate tax band

If you are a basic rate taxpayer, and you receive all your taxable income in dividends you will be up to £2,025 worse off.

The basic rate tax threshold for 2016/17 is £43,000 (personal allowance of £11,000, plus basic rate tax band of £32,000)

If a dividend of £32,000 is received it is taxable as follows, breaking it down into the different "slices":

The first £5,000 - covered by your dividend allowance

The next £27,000 (the remainder of your basic rate band) - taxed at the new 7.5% = £2,025 tax due.

Old dividend rules: this shows what would have been payable under the old rules (if they were in place in 2016/17)

If your gross dividend is £32,000 (including tax credit)

The first £32,000 falls into the basic rate band - taxed at 10% = £3,200

You receive a tax credit = £(3,200)

Tax is paid of £nil

The above examples assume that the taxpayer has other income which takes up their personal allowance.

Higher rate taxpayer £50,000 of dividends

A higher rate taxpayer will pay tax at 32.5% on any dividend income in excess of the new £5,000 dividend allowance and basic rate threshold, and an upper rate taxpayer will be taxed at the new 38.1% rate.

If you are a higher rate taxpayer, and you receive £50,000 of income in dividends in 2016/17 you will be worse off by £2,575

If a dividend of £50,000 is received it is taxable as follows, breaking it down into the different "slices":

The first £5,000 - covered by your dividend allowance

The next £27,000 - taxed at the new 7.5% = £2,025

The next £18,000 - taxed at 32.5% = £5,850

Total tax due = £7,875

Re-working 2016/17 for a higher rate tax payer under the current rules

If a dividend of £50,000 is received that is grossed up to £55,555 taxable as follows, breaking it down into the different "slices":

The first £32,000 - taxed at 10% = £3,200

The next £23,555 is taxed at 32.5% = £7,655

You receive a tax credit = £(5,555)

Tax is paid of £5,300

The above examples assume that the taxpayer has other income which takes up their personal allowance.

Small business owners

For small business owners the changes are likely to be extremely unpleasant, as the following examples, illustrate.

Small company examples

Example £50,000 dividend

Assume a sole director company has profits of £70,500 and it then pays its director a salary of £8,000 (that's to ensure basic NICs benefits) and after corporation tax votes him a dividend of £50,000 out of the remaining retained profit. What tax is paid under the new rules and how does that compare to what would have been paid if there had been no changes made to the dividend regime or to the Employers' NICs allowance?

New rules 2016/17 Tax paid
Company profit before salary and tax £70,500
Salary £8,000 -
Company profit after salary £62,500 12,500
Dividend paid of £50,000, taxed as:
£3,000 - covered by balance of personal allowance -
£5,000 @ 0% -
£27,000 @ 7.5% 2,025
£15,000 @ 32.5% 4,875
Total tax payable (new rules) £19,400
2016/17 as if under the old rules

Comparing old rules for 2016/17 Tax paid
Company profit before salary and tax £70,500
Salary £11,000 (covered by personal allowance) -
Company profit after salary £59,500 11,900
Dividend paid of £47,600 (£52,888) grossed up)
£32,000 @ 10% 3,200
£20,888 @ 32.5% 6,788
Less tax credit (5,288)
Total tax payable (old rules) £16,600
Increased tax payable following the changes for 2016/17 £2,800

Example £40,000 dividend

Assume a sole director company has profits of £58,000 and it then pays its director the most efficient level of salary and after corporation tax votes him a dividend of £40,000 out of the remaining retained profit. What tax is paid under the new rules and how does that compare to what would have been paid if there had been no changes made to the dividend regime?

New rules 2016/17 Tax paid
Company profit before salary and tax £58,000
Salary £8,000 (securing NICs benefits) -
Company profit after salary £50,000 10,000
Dividend paid of £40,000, taxed as:
£3,000 - covered by balance of personal allowance -
£5,000 @ 0% -
£27,000 @ 7.5% 2,025
£5,000 @ 32.5% 1,625
Total tax payable (new rules) £13,650
2016/17 as if under the old rules

Comparing old rules for 2016/17 Tax paid
Company profit before salary and tax £58,000
Salary £11,000 (covered by personal allowance) -
Company profit after salary £47,000 9,400
Dividend paid of £37,600 (£41,777 grossed up)
£32,000 @ 10% 3,200
£9,777 @ 32.5% 3,177
Less tax credit (4,177)
Total tax payable (old rules) £11,600
Increased tax payable following the changes for 2016/17 £2,050

The cost of this measure will decrease very slightly when corporation tax rates fall in 2017 to 19%, and to 18% by 2020.

Further examples showing the impact of the £5,000 dividend allowance:

1. How is dividend income taxed when non-dividend income is in excess of the personal allowance?

Example One: Higher rate taxpayer

An individual earns a salary of £38,000 and has dividend income of £14,000

This would be taxed as follows:

New rules 2016/17 Tax paid
Salary £40,000
£11,000 covered by personal allowance -
£29,000 taxed at basic rate 20% 5,400
Balance of basic rate band remaining £2,000
Dividend £14,000
£2,000 falls within basic rate band and is covered by the dividend allowance -
£3,000 falls within the higher rate band and is covered by the dividend allowance -
£9,000 falls within the higher rate band and is taxed at 32.5% 2,925
Total tax payable (new rules) £8,325
The dividend allowance has saved tax of £2,000 @ 7.5% and £3,000 @ 32.5%, totalling £1,125

Example Two: Upper rate taxpayer

An individual earns a salary of £147,000 and has dividend income of £15,000

This would be taxed as follows:

New rules 2016/17 Tax paid
Salary £147,000
£0 covered by personal allowance (lost due to income level) -
£32,000 taxed at basic rate 20% 6,400
£115,000 taxed at higher rate 40% 46,000
Balance of higher rate band remaining £3,000
Dividend £15,000
£3,000 falls within higher rate band and is covered by the dividend allowance -
£2,000 falls within the upper rate band and is covered by the dividend allowance -
£10,000 falls within the upper rate band and is taxed at 38.1% 3,810
Total tax payable (new rules) £56,210
The dividend allowance has saved tax of £3,000 @ 32.5% and £2,000 @ 38.1%, totalling £1,737

2. What is the impact on the loss of the personal allowance at £100,000?

The new regime will save tax for those who have an income including dividends just above the £100,000 limit, as follows:

An individual receives salary of £85,000 and dividends of £20,000.

For 2015/16 the dividend is grossed up, so that the relevant income for tax is £107,222. The loss of personal allowance is £3,611. Tax paid on dividends is £5,000.

For 2016/17 the dividend is gross, so that the relevant income is £105,000. The loss of personal allowance is only £2,500. Tax paid on dividends is £4,875. A further £444.44 is saved as a result of the increased personal allowance, giving a saving of £569 in total.


There is a similar impact on the High Income Child Benefit Charge for those with income just above the £50,000 limit.

****

Petitions against dividend tax

There are several petitions gainst this new tax. The most widely publicised petition is here: https://petition.parliament.uk/petitions/106525

A different version is here. (Noting that no donation is in fact required to this petition, although it asks for one)

Links:

HMRC Dividend Allowance Factsheet

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© 2016 RossMartin.co.uk

sara
U said earn 5000 explain it clearly and openly i didn't get any mean 2ñd
My hobby has 1800poumds per month salary ,,, and our first pay slip came on 5th January ,,,koi tax nhe leya hai just employee N.I.C tax 119pounds they took ,,,,my hubby sent that pay slip in what's up just to show me thank u

Rimsha
Hey sis hope u are fine sis im busy all the time i dont get time to comment
magar what happend 2u Ghalat howa ha acha kiya jo appeal and case kiya thats unfair nd sis im stressed myself trust me time h nahee hota :( my duas are always with h sis IA we will win bs sabar ka pal metha hota ha trust me x

Salma
Salam and Nope sis kahe p ye news nahee ha sirf your first £5000 s tax nahee lengy es k bad there will be deductions as ive read everywhere magar aise kahe nahe ki uk tax nahee lega as ive been working for 3years magar fhir v speak to your solicitor is best trust me ye forum bas help eachother magar satisfaction talk 2 a solicitor as it depend how much you earning! Im not sure magar uk will take tax thats what goes around so ye kabi b aise nahe karengy ki tax na lein warna uk is gona get messed fhir v you never kno! And han April 2016 your first £5000 you earn there wont be any tax deduction only for the 1st £5000 after there will be

To All,Of,You
Baat Ye Hai K Kuch Mahino sy UK government NY Tax Lena Mauf kia Hai ,,,,April k End 2016 THAK ,,,,,
TOH MERA MAIN MAQSAD YE HAI K TAX LENA UK GOVERNAMENT NE MIAF KIA HAI OR HAM KAAM KR K UK GOVERNAMENT TAX NHE LETY TOH AGER KOI 6MONTHS KA DOCOMENTS READY KR K UK,EMBACEY DOCOMENT SEND KAREY KIA OS DOCOMENT PY JIS MAI KOI TAX PAY NA HU ,,,, SPOUSE VISA DY GA ?????
HAM TO TAX DENA CHAHTY HAI MGR UK GOVERNAMENT NE ALL UK MAI TAX MUAFI KA ELAAN KR CHUKA HAI HAM TOH DYNA CHAHTY HAI MGR UK GOVERNAMENT KHOD NHE LENA CHAHTA ,,,,TOH BEHNO BHAIO APP B APNE SPOUSE SE POCHEY K WOH UK MAI APNE SOLICETER SE,OPNION LELAY,,,,