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Hi
…Anyone has a moment to explain me how the past paper answer has been calculated? i can’t make any sense? florina and kanzi scenario question..:(q
annual salary 50,000
receives div from her co (shes a director) 20,0000 every year
taxable benefits 25,000
other income unquoted unrelated dividend 150 received every junequestion- calc total tax saving by florina and flight hip ltd , in tax year 17/18, the company were to make a single lump contribution to personal pension fund for Florina – instead of paying her a dividend?
exam paper answer –
3500 (5000-1500) x 0%=0
16500 x32.5% = 5362tax cost 5362 (equal to the tax saving if the dividend is not paid)
PLease explain as I am not getting the above working , what is the 5000-1500? why % percent ?…..
Hi
She is a higher rate taxpayer, that is her total employment income is above £33,500 so her dividends are taxed at the higher rate of 32.5%.
In 17/18 individuals get a £5,000 annual tax free allowance, the £1,500 other div income received annually eats into this annual allowance.
This then leaves £3,500 of the tax free allowance available to absorb other dividend income, so their £20,000 employer dividend uses up the remaining allowance.
The remaining £16,500 is then taxed at the higher rate.
I hope this helps.
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