Calculation:
1) Add together gross income (this means the whole sum before tax is deducted) from all sources.
Where tax has already been deducted at source (e.g. by employer), use this calculation to gross up:
- For interest = net interest x 100/80
- For dividend = net dividend x 100/90
2) Then take away any charges (e.g. interest paid on loans or pension scheme contributions)
3) Then take away the personal allowance of £9,440
If the individual's income is over £100,000 use the following calculation: £9,440 - ((net income - £100,000)/2) = reduced allowance to be deducted.
4) Apply the rate of tax in the following order: Non-savings, Savings, Dividends.
Rates:
Basic Rate - £0 - £32,010 = 20% (or 10% for dividends)
Higher Rate - £32,010 - £150,000 = 40% (or 32.5% for dividends)
Additional Rate - over £150,000 = 45% (or 37.5% for dividends)
5) Add together the tax calculated for each type of income at step 4.
6) Take away tax deducted at source (i.e. in step 1 if you had to gross up the interest or dividend, now take away any money added on)
THE FIGURE YOU END UP WITH IS THE AMOUNT PAYABLE TO HMRC
