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Posted Wed, 08 Mar 2023 11:46:49 GMT by n sal
If the gross income including savings and dividend income exceeds the basic tax rate threshold ( £50270) but sufficient gross pension contributions ( that enlarge the basic rate tax band by the same amount) are then paid in that year to ensure that the entire gross income is kept within the expanded basic rate tax band, then: 1 ) will the Personal Saving Allowance PSA be preserved at £1000 ( instead of normally dropping to £500 for higher rate tax payers) and will any remaining savings above that PSA be then taxed at the basic rate instead of the higher rate? 2) will the dividend income above the £2000 dividend allowance be taxed at the basic rate ( 8.75%) instead of the higher rate?
Posted Thu, 09 Mar 2023 16:40:56 GMT by HMRC Admin 10
Hi
The personal savings allowance would still remain at £500 to leaving the remaining interest liable at basic rate.
The dividends, if over £2000, will be liable at the higher rate which for 22/23 is 33.75%.
Thankyou.
Posted Thu, 16 Nov 2023 15:57:55 GMT by SY C
Hi team, As it looks contradictory with the below reply, could you clarify whether the pension contribution would affect the dividend tax band? Should the dividend tax be taxed at basic rate if the expanded basic rate tax band is increased by pension contribution? https://community.hmrc.gov.uk/customerforums/sa/116dff9a-41c7-ed11-9ac4-00155d9771aa Thanks in advance. Regards, Simon
Posted Tue, 21 Nov 2023 13:01:05 GMT by HMRC Admin 32
Hi SY C,

This depends on the level of income and pension contribution made. If you are still within the basic rate band with your earnings and interest, then yes you would still get the lower rate for your dividends.

Please see:

Tax on dividends

Income Tax rates and Personal Allowances

Thank you.
Posted Wed, 22 Nov 2023 21:58:32 GMT by SY C
Hi Admin, I would like to double confirm, suppose I have 50270 salary and 10000 dividend, if I put 10000 into private pension, will the 10000 dividend income be taxed in basic rate (8.75%) or higher rate (33.75%)? Thanks. Regards, Simon
Posted Fri, 24 Nov 2023 10:05:53 GMT by HMRC Admin 20
Hi SY C,
In your tax return, you would declare the amount paid into your pension scheme, to claim tax relief.  
This will extend the basic rate band, by the amount paid into your pension scheme.  
Only then would you know whether your dividends would be taxed at which rate.
Thank you.
Posted Thu, 07 Mar 2024 19:38:51 GMT by n sal
Thank you HMRC Admin20 Further to this conversation subject please help by answering this hypothetical scenario for the current tax year 2023/4. If my taxable income from salary/ rental income adds up to £50,000 and I also receive £1250 from Building Society interest and £900 in dividends but I also make gross pension contributions of £10,000 then I understand that the basic rate tax band gets expanded by this £10000 contribution (to £47700 from £37,700) and therefore my total income including the savings interest and dividends (and after taking into account the personal tax allowance) will all fall within this expanded basic rate tax band. Therefore can I assume that my personal saving allowance will be £1000 rather than reduced to £500 and therefore I would only pay tax @ 20% on just the balance of £250 of interest ( £1250 minus £1000) and also I would pay no tax on the dividend because it is less than the £1000 dividend allowance for this tax year. Are the above assumptions correct? Thank you
Posted Mon, 11 Mar 2024 12:51:04 GMT by HMRC Admin 8
Hi,
That would be correct.
Thank you.
Posted Mon, 18 Mar 2024 21:57:03 GMT by richard charlton
I’m looking at the answers given by HMRC and they seem contradictory with the answer 1 and the most recent ? My question is this. My profits with self employment are £60k. If I paid £10k into pension I would then claim higher pension tax relief through my self assessment. Seems to make sense. This would bring me under the threshold and so would I then have £1000 allowance for savings interest ? The examples above. Once the savings allowance is used up is all additional interest paid @20% tax ? Many thanks Richard
Posted Fri, 22 Mar 2024 14:00:43 GMT by HMRC Admin 32
Hi,

If you are a higher rate tax payer then you would be entitled to £500 Personal Savings Allowance. Details online at:

Tax on savings interest

Thank you.
Posted Mon, 01 Apr 2024 20:22:18 GMT by Vincent Peterkin
hi I have a question similar to the above. I make £70000 a year and i have received a dividend of £10000. i want to offset the tax owed on this by putting money in a sipp. if i put £5650 into a sipp i should get a top up and a rebate of £1130 which should cover the £1130 tax i would have to pay on the £4350 of the dividend that i would keep. Am i right in my thinking.
Posted Wed, 10 Apr 2024 13:54:43 GMT by HMRC Admin 5
Hi Vincent Peterkin

Yes the tax relief due on your SIPP would be set against any tax due on your dividend income.  

Thank you
 
Posted Thu, 11 Apr 2024 05:08:31 GMT by Masquedefer Curran
Hi I have a question regarding the £5,000 savings allowances. I am retired and my total pension income is £12,500. My savings interest in 24/25 will be £9,700. The UK pensions advisory helpline have told me that if I contribute £2880 to a SIPP the government will not only add £720 thus making this up to £3600, but that this £3600 pension contribution will also be deducted from my unearned pension income thus enabling me to receive the extra interest tax free. However in 23/24 I made the same pension contribution but the hmrc tax calc did not reduce my pension income by £3,600. I just received a note that my basic rate allowance would be increased by £3,600 from £50,570 to £54, 170. The Pensions helpline assured me that hmrc would reduce my pension unearned income by £3,600.

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