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HMRC internal manual

Savings and Investment Manual

Savings and investment income: tax is charged on the ‘gross amount’ of income

Grossing up

Income tax is calculated by reference to the ‘gross amount’ of a payment (ITA07/S982), and sometimes ‘grossing up’ to include tax deducted at source is required. This is common with savings and investment income received by individuals.

The ‘gross amount’ means the sum of the net amount and the tax deducted. ITA07/S998 gives the following formula for grossing up:

GA = NA + (NA x R\100-R)

GA is the gross amount

NA is the net amount

R is the percentage rate of tax by reference to which the net amount is to be grossed up.

Dividend income commonly requires grossing up in respect of the tax credits attached to them. See SAIM5090 for more details.