External Obstacles
s paid on the dividends you receive. It is not payable on any profit you make from selling the shares (except if your business is share-dealing). Income tax, however, is usually payable on the profits from dealing in traded options.
In practice, the amount of the dividend you receive has effectively already had basic rate tax deducted from it. Thus, if the tax rate is 40% and you receive £1146, you are regarded as having received £1200 dividend on which you have already paid £154 income tax. This £154 is known as the 'tax credit'. The actual amount is shown on your dividend warrant. The same principle applies to bank and building society interest.
You are required to disclose the dividends you receive on your tax return, but you will not pay any more tax unless your total income makes you liable to the higher rates. The figure at which higher rate tax becomes payable is usually revised each year in the Budget.
Such additional tax is obtained by an assessment which covers other such assessable income.
The tax is payable in the tax year in which you actually received the dividend, not that to which the dividend relates. If no dividend is received, no tax is payable. There is therefore no equivalent of loss relief or bad debt relief for dividends.
An issue of shares in lieu of a dividend is treated as a dividend and is subject to income tax at an 'appropriate value'.
On the sale or purchase of shares, 'bondwashing'provisions may apply.
All dividend income is regarded as investment income for income tax purposes. Investment income was once subject to investment income surcharge. Although this was abolished in 2024, the distinction can still be important in other tax considerations (such as separate taxation of a wife's earnings, f
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