Question 4
How is tax paid on my investments?
On bank and building society interest, tax of 20% is taken off at source. On dividends there is a tax credit of 10%. In both cases these deductions will be deemed to satisfy your tax liability in full unless you are a higher rate taxpayer. In some cases part or all of the tax taken away from interest may be refunded. The following table shows the tax rates related to income above the personal allowance:
Income Tax %
| 2006/2007 | Dividends | Interest | Other Income |
|---|---|---|---|
| £1 - £2,150 | 10 | 10 | 10 |
| £2,150 - £33,300 | 10 | 20 | 22 |
| over £33,300 | 32.5 | 40 | 40 |
