Personal Tax Calc - Example 4

This example is for high earned income with interest income and dividends, ie earned income of £140,000 (gross), interest income of £15,000 (gross) and dividend income of £20,000 (gross). Note that I have grossed all the income figures (see Net to Gross).   

Personal tax pyramid 5

1. As the earned income is greater than £100,000 the taxation benefit of the personal allowance is reduced. In this case the full taxation benefit allowance is reduced. The specific rules are given in high earnings and personal allowance. The earned income pyramid is changed to reflect this by making the bottom layer a 20% tax layer rather than 0% in the default earned income pyramid.

The taxation due on the earned income is £49,546  ie ((20% of £7,475) + (20% of £30,255) + (40% of £105,000)). Assuming the tax code was set up correctly, this is likely to have been paid as part of PAYE.

2. Given the high earned income we draw the gross interest income (£15,000) starting in the 40% band. As this is filled by the first £10,000 of interest income , the remaining £5,000 of interest income is taxed within the top layer (at 50.0%). The taxation due is £6,500 ((40% of £10,000) + (50% of £5,000)). As this was paid net by the bank, 20% (£3,000) will have been paid leaving an additional £3,500 to pay.

3. Given the high earned salary and interest income, the gross dividend income of £10,000 is drawn in the top dividend tax band ie 42.5%. The taxation due is £8,500 (42.5% of £20,000). There will be a tax credit of 10% (ie 10% tax paid before payment of the dividend), hence the additional tax due is £6,500 (ie £10,000 - (10% of £20,000)).

The total taxation is the sum of these is £64,546 (£49,546 + £6,500 + £8,500) of which all but £10,000 (£0 + £3,500 + £6,500) is likely to have been paid.