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Free Guides for new and growing businesses from HRBS - fixed fee accountants and business advisors

Maximise use of your basic rate tax band

hrbs.biz guide to maximising the use of your basic rate band Maximise use of your basic rate tax bandI originally posted this article on the a4uforum in March 2007, and have updated it for the current (2015/16) tax thresholds.

I recommend to all our clients that they maximise the use of their basic rate band. This can be done by declaring interim dividends to take total taxable income up to the maximum at which the basic rate will still apply.

As dividends currently have a 10% tax credit attached, this tax credit can be used to effectively pay the basic rate personal tax liability on the dividend. This is why they are known as “tax free” dividends. Higher rate and additional rate tax payers will have extra tax to pay which is usually collected via self assessment and so they would need to register for self assessment and submit a tax return to HMRC to report the income and tax liability.

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