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HMRC internal manual

Savings and Investment Manual

Dividends and other company distributions: stock dividends: the tax charge: tax treated as paid

Income tax is treated as paid

ITTOIA05/S414 explains how a person’s income tax liability is satisfied (in whole or inpart). Under subsection (1), the taxpayer is treated as having paid income tax at thedividend ordinary rate on the amount charged to tax.

Subsection (2) provides that the tax treated as paid is not repayable. This applies evenif the person liable is a non-taxpayer.

Subsections (3) to (5) ensure that individual taxpayers cannot be given credit for incometax on more than the amount charged to income tax. So, for example, if the individual’stotal income is reduced by deductions (for example, personal allowances) such that thestock dividend income is only partially brought into charge to tax, credit will only begiven for so much of the stock dividend income as is so taxed.

Stock dividend income that would otherwise be chargeable at higher rate is taxable at thedividend upper rate (SAIM1070).