Income Tax (Trading and Other Income) Act 2005 section 414

Income tax treated as paid

Section 414 explains how income tax on stock dividends is treated as already paid, including the limits on tax credits and the rule that such tax is non-repayable.

• When a person is liable to tax on a stock dividend, they are treated as having already paid income tax at the dividend ordinary rate on the amount charged to tax
• The income tax treated as paid on stock dividends is not repayable, even if the recipient is a non-taxpayer
• Individual taxpayers can only receive credit for income tax up to the amount of stock dividend income that is actually brought into charge to tax
• Where personal allowances or other deductions reduce the taxable amount, the tax credit is proportionally reduced to match only the portion of stock dividend income that remains taxable