Can someone please advise on the following scenario:
- Income from Employment: £17,000
- Income from savings: £100
- Income from UK dividends: £40,150
- Contributions into private pension £7,200 + tax relief = £9,000
- Tax code: K1116 X
Please advise on the following:
1. Does the tax code effect the normal personal allowance of £12,570, or is it just a mechanism to claim estimated unpaid tax? I believe it’s the latter but just want confirmation ….
2. If the tax code does not affect the personal allowance of £12,570 then am I correct that the basic rate tax be applicable on income up to £59,270, based on personal allowance of £12,570 + basic rate limit of £37,700 plus pension contributions of £9,000?
3. If the tax code does affect the personal allowance of £12,570 then would the basic rate tax be applicable on income up to £35,540, based on ‘personal allowance’ of -£11,160 + basic rate limit of £37,700 plus pension contributions of £9,000?
4. Assuming the tax code does not affect the personal allowance and the basic rate tax is applicable on income up to £59,270, would tax payable be £4,224.12, based on:
• Savings £100 x 0% (as below £1,000 PSA)
• Income Tax: £17,000 - £12,570 = £4,430 x 20% = £886.00
• Dividend tax: £40,150 - £2,000 = £38,150 x 8.75% = £3,338.12
The above assumes that the increase to the basic rate limit due to pension contributions is also applicable to the dividend tax – is that correct?
If my tax payable calculation is incorrect, please advise (with explanation) what it should be.
5. If the tax code does affect the personal allowance and the basic rate tax is applicable on income up to £35,540, would tax payable be £12,140.62, based on:
• Savings £100 x 0% (as below £500 PSA)
• Income Tax: £17,000 x 20% = £3,400 (as no tax free amount)
• Dividend tax at basic rate: £35,540 - £17,000 = £18,540 - £2,000 = £16,540 x 8.75% = £1,447.25
• Dividend tax at higher rate: £40,150 - £18,540 = £21,610 x 33.75% = £7,293.37
Again, the above assumes that the increase to the basic rate limit due to pension contributions is also applicable to the dividend tax – is that correct?
If my tax payable calculation is incorrect, please advise (with explanation) what it should be.
Thank you for any guidance on the above.
