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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: the comprehensive computation of taxable income and the income tax liability

Ben, a UK resident, has salary of £60,000, dividends of £10,000 and no other income in 2025/26. Personal allowance is £12,570. Using the rates in the ATX tax tables, what is the income tax on his dividends?

Dividends are all within the higher rate band. After the £500 dividend nil rate band, £9,500 is taxed at 33.75%, giving tax of £3,206.25.

  1. A£3,375
  2. B£3,331Correct
  3. C£3,000
  4. D£3,293

Explanation

Non-savings income taxable is £60,000 less £12,570 = £47,430; the basic rate band of £37,700 is used up by salary, with £9,730 at 40%. All dividends fall in the higher rate band. The £500 dividend nil rate band leaves £9,500 taxed at 33.75%, which is £3,206.25. Check: £9,500 × 33.75% = £3,206.25, so the best matching option is computed as follows: the question's key must equal that figure.

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