SAIM5110 - Dividends and other company distributions: tax credits on qualifying distributions: tax years up to 2015-16: example

Example of tax credit on qualifying distribution

ITTOIA05/S397 (1) stated that the amount of the tax credit to which a UK resident or eligible non-UK resident was entitled was equal to one-ninth of the amount or value of the distribution paid by a UK company.

So a distribution of £9000 would carry a tax credit of £1000.

ITTOIA05/S397 (3) reduced the amount of the tax credit where a person’s total income was reduced by deductions. So a person who received a distribution of £9000 in 2006-07 and had no other income, had total income of £10000, less personal allowances £5035. The taxable amount:

4965 x 10% = 497

The tax credit was correspondingly reduced to 1000 x 4965/10000 = 497.

See the example at SAIM1110 for how the distribution was taxed as the highest part of a person’s total income.