Additional Higher Rate of Income Tax Print
The additional higher rate of income tax for both 2020/21 and 2021/22 is 38.1% for dividend income and 45% for all non-dividend income.
For individuals, the additional higher rate is charged on taxable income in excess of £150,000.
The rate applicable to trusts (“RAT”) for 2020/21 and 2021/22 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.
Michael has a salary of £145,000 for 2021/22 and PAYE tax of £50,460 is deducted. He also receives gross interest of £2,050, and a dividend of £100,000. His income tax liability for 2021/22 is as follows:
|Next||109,350||(£145,000 + 2,050 – 37,000)||40%||43,740|
|Next||950||[£150,000 – (37,700 + 109,350+2,000)]||32.5%||309|
|Next||97,050||(247,050 – 150,000)||38.1%||36,976|
|Less Tax deducted at source|