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Readers' forum : A taxing issue

09 January 2018
Issue: 4630 / Categories: Forum & Feedback

Calculating the correct repayment for top-slicing relief on a chargeable event.

Tim Good wrote an enlightening article in Taxation on 27 September explaining how HMRC had been incorrectly calculating top-slicing relief. The article confirmed that the savings allowance was available to set off against chargeable events but for one of our clients this has given rise to an unexpected repayment.

The client’s income for 2016-17 breaks down as follows.

  • Interest – £750.
  • Dividends – £5 500.
  • Employment income – £12 000 (less tax deducted under PAYE of £200).
  • Chargeable event – £8 750.

Excluding the chargeable event this income resulted in a tax liability of £37.50. This related to the tax on the dividends that fell into the basic rate band but exceeded the dividend allowance. Logically I would expect any tax liability that is due for the year to be in excess of...

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