Additional Higher Rate of Income Tax Print

The additional higher rate of income tax for both 2018/19 and 2019/20 is 45%. This rate applies to individuals and certain trusts.

For individuals, the 45% rate is charged on taxable income in excess of £150,000. The rate of tax on dividend income for 2018/19 and 2019/20 is 38.1% on income over the £150,000 limit.

Example:
Michael has a salary of £125,000 for 2018/19 and PAYE tax of £43,100 is deducted. He also receives gross interest of £2,050, and a dividend of £100,000. His income tax liability for 2018/19 is as follows:

£
Salary 125,000
Interest 2,050
Dividends 100,000
227,050
Tax Thereon:
First 34,500 20% 6,900
Next 92,550 (£125,000 + 2,050 – 34,500) 40% 37,020
Next 2,000 0% 0
Next 20,950  [£150,000 – (34,500 + 92,550+2,000)] 32.5% 6,809
 Next  77,050  (227,050 – 150,000)  38.1% 29,356
 80,085
Less Tax deducted at source
PAYE* (43,100)
Tax Payable  36,985

The rate applicable to trusts (“RAT”) for 2018/19 is 45%. For dividend income the RAT is 38.1%. All forms of discretionary trusts are liable to pay income tax at the RAT. There is no dividend allowance for Trusts.

The first £1,000 of trust income is charged at the start-rate of 20% to exclude the smallest trusts from the higher rates of tax. Where the Settlor has created more than one trust, this start rate is divided between these connected trusts, but is subject to a de-minimis limit of £200 per trust.

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