Dividend Income Effect on Overall Tax and Allowances

Hello, I am getting confused on the £2,000 dividend allowance. My dividend income is below this figure, yet when totalling my income for the year, this dividend income pushes my total income above £100,000 thus adding an additional tax charge. I expect to pay the following on employment income: 20% on £37,700; 40% thereafter. I understand the reduction in my £12,570 personal allowance herein. However, why is the sub-£2,000 dividend added to this figure when it should be covered by the dividend allowance? It makes dividend income Triple Taxed - at the company level, the withholding tax and now on the personal level (even if it is within the dividend allowance). Can you please advise? Thanks for your help in advance.

Hi Customer9999,
This is still taxable income and is added to show your total income received.
If this then takes you over 3100k, your allowances will be correctly reduced.
As the actual amount is still within the dividend allowance for being taxed, then the tax rate applied will be 0%
Thank you. 

Hello, Could you please help to clarify whether my understanding in the below case for year 2023/24 is correct or not? Wages: 50,200 Dividend income: 10,000 Total : 60,200 Less: personal allowance: -12570 Subtotal: 47,630 Tax taxable: Wages: (50,200-12,570 = £37,630) *20% Dividend: (10,000-500) = £9,500 of which £70 taxed at 8.75% and £9,430 taxed at 33.75% Many thanks

Hi chiyu

Yes that would be correct. 

Thanks

Thank you very much! If I change the above case a bit by replacing the wages with interest income i.e. Interest income: 50,200 Dividend income: 10,000 Total : 60,200 Less: personal allowance: -12570 Subtotal: 47,630 Less: Starting rate for savings -5000 (since other income i.e. dividend income is less than 12,570, entitle to full amount) Less: Personal Savings Allowance -500 (since gross income 60,200 fall under higher rate tax band, only entitle to 500) Total: 42,130 Tax taxable: Interest: (50,200-12,570-5000-500 = £32,130) *20% Dividend: (10,000-500) = £9,500 of which £5,570 taxed at 8.75% and £3,930 taxed at 33.75% Could you please advise whether my understanding above is correct or not?

Hi,

 You can see guidance here:
 
 HMRC tools and calculators

Thank you.