Is it correct that when a company pays a dividend to a shareholder, it also pays over a tax credit of 10% at the same time? Then the grossed up dividend (amount + credit) is used to calculate taxable income? A basic rate tax payer would not pay any further tax on the dividend, but a higher rate tax payer would? The sums don't add up here, (as tax credit of 10% <> basic tax rate), but this is how I saw it described somewhere (exam solution/notes, can't remember). Thanks