Wife earnings and dividend income
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- Lemon Pip
- Posts: 63
- Joined: November 22nd, 2016, 7:01 am
Wife earnings and dividend income
Hi everyone
Question.
My wife earns £8400 per year in her job and is a non-taxpayer and does not make NI contributions.
Am I correct in thinking that she would therefore have £4170 allowance left to be paying 0% tax on dividends she makes from stocks each year?
And, would it be also correct that she would NOT need to complete a self-assessment as long as the dividends were less than £4170, this keeping her in the zero tax band.
The reason I am asking is that I am thinking that having used up our ISA allowance and pension contribution, it is worthwhile posting excess funds into her general investment account to buy stocks than mine.
Not, I am tapered and thus any dividend income I make lowers the amount I will contribute to my pension.
TIA
Del
Question.
My wife earns £8400 per year in her job and is a non-taxpayer and does not make NI contributions.
Am I correct in thinking that she would therefore have £4170 allowance left to be paying 0% tax on dividends she makes from stocks each year?
And, would it be also correct that she would NOT need to complete a self-assessment as long as the dividends were less than £4170, this keeping her in the zero tax band.
The reason I am asking is that I am thinking that having used up our ISA allowance and pension contribution, it is worthwhile posting excess funds into her general investment account to buy stocks than mine.
Not, I am tapered and thus any dividend income I make lowers the amount I will contribute to my pension.
TIA
Del
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- Lemon Slice
- Posts: 340
- Joined: November 4th, 2016, 12:18 pm
Re: Wife earnings and dividend income
No. The 4k or so personal allowance she has left can only be used on earned income - not dividend income, but there is seperate £2000 dividend allowance that she can use for the moment.
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- Lemon Half
- Posts: 6209
- Joined: November 4th, 2016, 11:24 am
Re: Wife earnings and dividend income
Yes and no. Yes, as the personal allowance is currently £12,570, then she would have £4,170 of that allowance left to have tax free income of almost any sort.deltrotter wrote:My wife earns £8400 per year in her job and is a non-taxpayer and does not make NI contributions.
Am I correct in thinking that she would therefore have £4170 allowance left to be paying 0% tax on dividends she makes from stocks each year?
No, she would not have £4,170 left to be paying 0% tax on dividends -- she'd have £6,170, 'cos as well as the remaining £4,170 of PA there's also a £2,000 dividend allowance, under which the first £2K of dividends is taxed at 0%.
Additionally she could also have £1,000 of interest (from bank accounts, etc) and £1,000 of self-employment income (e.g. baby sitting, ebay trading, etc) tax free.
See here: https://www.gov.uk/income-tax-rates
Yes and no.deltrotter wrote:And, would it be also correct that she would NOT need to complete a self-assessment as long as the dividends were less than £4170, this keeping her in the zero tax band.
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That is incorrect. The personal allowance applies to all forms on income. See the above link where is says, "The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on" and note that is unconditional; it does not say "earned" income.fisher wrote:No. The 4k or so personal allowance she has left can only be used on earned income - not dividend income...
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- Lemon Slice
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Re: Wife earnings and dividend income
Not quite. The balance of personal allowance can be used against anything at all. Then she gets 2k dividend allowance, then 1k PSA ( interest income ). At that level of income she also gets a Starting Rate ( being 0% ) of 5k against interest income. So 12570 ( anything ) + 5000 ( interest ) + 1000 ( interest ) + 2000 ( dividends ).fisher wrote:No. The 4k or so personal allowance she has left can only be used on earned income - not dividend income, but there is seperate £2000 dividend allowance that she can use for the moment.
The interest portion can be generated from corporate bonds, or bond funds / ETFs if they pay interest rather than dividends; it doesn't have to be bank interest.
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- Lemon Slice
- Posts: 340
- Joined: November 4th, 2016, 12:18 pm
Re: Wife earnings and dividend income
My mistake - apologies.genou wrote:Not quite. The balance of personal allowance can be used against anything at all. Then she gets 2k dividend allowance, then 1k PSA ( interest income ). At that level of income she also gets a Starting Rate ( being 0% ) of 5k against interest income. So 12570 ( anything ) + 5000 ( interest ) + 1000 ( interest ) + 2000 ( dividends ).fisher wrote:No. The 4k or so personal allowance she has left can only be used on earned income - not dividend income, but there is seperate £2000 dividend allowance that she can use for the moment.
The interest portion can be generated from corporate bonds, or bond funds / ETFs if they pay interest rather than dividends; it doesn't have to be bank interest.
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- Lemon Half
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Re: Wife earnings and dividend income
Good point, forgot about the starting rate! https://www.gov.uk/apply-tax-free-interest-on-savingsgenou wrote:At that level of income she also gets a Starting Rate ( being 0% ) of 5k against interest income.
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- Lemon Pip
- Posts: 63
- Joined: November 22nd, 2016, 7:01 am
Re: Wife earnings and dividend income
Thanks everyone, this is incredibly helpful. Over and above my question and figures, I have learnt a deal more.
But, to confirm, using the figures in my original post, she would be able to earn £6,170 in dividends without paying tax on that and NOT have to complete a self-assessment?
TIA
Del
But, to confirm, using the figures in my original post, she would be able to earn £6,170 in dividends without paying tax on that and NOT have to complete a self-assessment?
TIA
Del
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- Lemon Slice
- Posts: 630
- Joined: March 22nd, 2017, 10:17 am
Re: Wife earnings and dividend income
I'd keep an eye on that £2k dividend allowance it may well decrease or disappear. only a few years ago it was £5k.deltrotter wrote:Thanks everyone, this is incredibly helpful. Over and above my question and figures, I have learnt a deal more.
But, to confirm, using the figures in my original post, she would be able to earn £6,170 in dividends without paying tax on that and NOT have to complete a self-assessment?
TIA
Del
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- Lemon Slice
- Posts: 881
- Joined: November 4th, 2016, 1:12 pm
Re: Wife earnings and dividend income
Yes.deltrotter wrote:Thanks everyone, this is incredibly helpful. Over and above my question and figures, I have learnt a deal more.
But, to confirm, using the figures in my original post, she would be able to earn £6,170 in dividends without paying tax on that and NOT have to complete a self-assessment?
TIA
Del
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- Lemon Slice
- Posts: 294
- Joined: November 5th, 2016, 4:02 pm
Re: Wife earnings and dividend income
There's also that extra allowance for interest for low-earners: "starting rate for savings".
https://www.gov.uk/apply-tax-free-interest-on-savings
https://www.gov.uk/apply-tax-free-interest-on-savings
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- Lemon Half
- Posts: 6209
- Joined: November 4th, 2016, 11:24 am
Re: Wife earnings and dividend income
There's seems to be an echo in here ... https://www.lemonfool.co.uk/viewtopic.p ... 83#p443683Kantwebefriends wrote:There's also that extra allowance for interest for low-earners: "starting rate for savings".
https://www.gov.uk/apply-tax-free-interest-on-savings
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- Lemon Slice
- Posts: 851
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Re: Wife earnings and dividend income
and as an option...she could transfer her unused PA to you thus reducing YOUR tax payments
worth a lot if you a higher rate taxpayer
otherwise 'only' 20%
but it might need a form to be completed
worth a lot if you a higher rate taxpayer
otherwise 'only' 20%
but it might need a form to be completed
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- Lemon Half
- Posts: 7479
- Joined: November 4th, 2016, 6:11 pm
Re: Wife earnings and dividend income
That benefit isn't that good. You can only transfer £1,260 of the allowance, and only if the transferee is a basic rate taxpayer.mutantpoodle wrote:and as an option...she could transfer her unused PA to you thus reducing YOUR tax payments
worth a lot if you a higher rate taxpayer
otherwise 'only' 20%
but it might need a form to be completed
Scott.
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- Lemon Slice
- Posts: 851
- Joined: November 7th, 2016, 4:21 pm
Re: Wife earnings and dividend income
ah ha!
ok Scott
I was aware of the offer but unable to do it so hadnt read small print
ok Scott
I was aware of the offer but unable to do it so hadnt read small print