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Hi,
Why dividends are grossed up to work out taxable income? In case of interests is understable becasue tax is charged at source but why dividens if neither hmrc nor issuer charge tax for dividends
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hi guys , im asking the same question as bik123
First thing you don’t need to know why – you just do it! Now that’s said the system goes back a long way to something you do NOT need to know called ACT which gave rise to the credit in the hands of the dividend recipient but when it was abolished HMRC maintained the 10% tax credit – why do this? Well by grossing up the dividend in the income tax computation that will use up more of the basic rate band and make it more likely therefore that higher rate or even additional rate tax would become payable on the dividend income!!
Hope this helps but again just do it you will never have to explain it! Enjoy your Tax!I am asking because when i know background, reason of computation i can remember them better. Anyway thank you for great explanation
Dividend story explained here.
https://www.centrica.co.uk/index.asp?pageid=254
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