Income tax applies to the amount of income after deduction of personal allowances.
Income is taxed in a specific order with savings and dividend income taxed last.
The dividend rate is partially satisfied by a 10% tax credit given on dividends. Therefore dividends falling within the basic rate band do not suffer any additional tax.
Income Tax Rates
|Income Tax Rates||2016/2017||2015/2016|
|10% starting rate (for savings income only) to:||n/a||£2,880|
|20% basic rate on income to:||£43,000||£31,865|
|40% higher rate on income to||£150,000||£150,000|
|45% additional rate on income above||£150,001+||£150,001+|
|Higher rate on dividends||32.5%||32.5%|
|– effective rate with tax credit||25%||25%|
|Additional rate on dividends||38.1%||37.5%|
|– effective rate with tax credit||30%||30%|
|The starting rate band is only applicable to dividends and savings income.
The 10% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.