# Income tax computation Example 3 and 5

1. omarmahfooz says:

The personal allowance is applied to Non-savings first, then Savings, and then finally dividend Income.

If there is no Non-savings income, Personal allowance can be applied to savings income or even dividend income.

One should not mix the format.. It is always Non-savings, savings and then Dividend.

Suppose if the Non-savings Income is only 5000. So the personal allowance should be charged 5000 to Non-savings, and the remaining amount of Personal allowance should be charged to Savings Account.

Important thing to notice, Personal allowance can make your taxable Income maximum to Nil, but never negative.

2. macarthur says:

Sir,pls i was abit mixup with example 5,with the treatment of starting rate at 2035 instead of 525

3. chimsa says:

Thanks

4. ozemoya36 says:

it is correct to deduct personal allowance from the saving income or dividend where there is no non saving income or where it is not up to 7,475?

5. uuuu says:

very good lecture.
But confused in concept of notional tax credit on dividend.
Sir what I have understand regarding notional tax credit on dividend is that when a person earns the
dividend income from a company. The company itself
deduct 10% of the dividend income and give remaining income to the dividend holder. But it never submit to the HMRC. So what is the reason for grossing it up.
Why the company not give the dividend to the dividend holder Pound 2,000 in example # 7 instead Pound 1,800
Sir kindly clarify.

6. prit says:

hi , Is it 2560 or 2760? m confused. Please guide me.
thnk yu.

• mahmudunnabi says:

@prit, 2560 is for the tax year 2011/12 and 2760 is for the tax year 2012/13. we have to use 2560 for this year’s exams.

• prit says:

@mahmudunnabi, Thnk Yu so much

7. peersahab007 says:

but sir y did u taxed savings at 10 %?and then at 20 %?

• elsie2009 says:

@peersahab007,
First £2710 (2012-13) of savings income is taxed at 10% if non savings is nil or less than £2710.

8. quartey11 says:

pls i thought the 10% starting rate band has been abolished

• omarmahfooz says:

@quartey11, Not really…

If the Non-savings Income is less than 2560, It has to be charged at 10 % !

9. awinoren says: