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.