Dividends are one of two sources of income from your investments, the other being interest. In both cases, the relevant dates in a tax year are 6th April to 5th April, inclusive.
Companies usually pay dividends twice in their financial year - an interim dividend and a final dividend - although growth companies may pay no dividend at all. The dividend is expressed as a number of pennies per share (Dividend per Share or DPS).
If you hold the shares in your own name, you will be sent a cheque by the company, which will be accompanied by a tax voucher. The cheque can be banked, and the tax voucher should be kept safely.
Below is an example of a tax voucher, using the fictional Bigyield plc which paid a 9p per share dividend on 1st March 2001. Its tax voucher looked like this:
Example
| Name of the company: | Bigyield plc |
| Holding: | 1,000 |
| Dividend per share: | 9p per share to holders registered on 11th March 2001 |
| Amount payable: | £90 |
| Tax credit: | £10.00 |
Note that as well as paying you 9p per share (£90), Bigyield has notionally but not actually paid 10% of the gross amount as tax on your behalf. So, although you only received £90, the tax position is:
| Actually Received | £90.00 |
| Tax credit | £10.00 |
| Investment income | £100.00 |
As the next page explains, this tax credit is important in establishing your tax liability.
If you hold your shares in a nominee account, your broker will receive dividends and send you statements showing the amounts received. Most brokers will also produce a consolidated tax statement for each tax year.
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