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

Priya has taxable non-savings income of £30,000 after the personal allowance and receives dividends of £10,000 in 2025/26. No other income applies. Using the dividend nil rate band and the dividend rates in the ATX-UK tables, what is the income tax on her dividends?

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  1. A£437.50
  2. B£831.25Correct
  3. C£875.00
  4. D£1,331.25

Explanation

Basic rate band is £37,700, so £7,700 remains for dividends. The first £500 is at the nil rate. The remaining £7,200 in the basic band is taxed at 8.75%, giving £630. The final £2,300 falls in the higher band at 33.75%, giving £776.25. The total is £1,406.25. Revisiting: the £500 nil rate band uses up part of the basic band, so £500 nil, £7,200 at 8.75% = £630, and the remaining £10,000 − £7,700 = £2,300 at 33.75% = £776.25. Total £1,406.25.

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