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Dear Sir/Madam,
When you calculate Tax credit on Bank Deposit Interest in the case where non savings income is absent do you take the taxable income (which is Savings income amount less Personal Allowance) or the original amount without deducting the Personal Allowance for savings tax credit calculation.
And does this rule apply to dividend tax credit as well where non savings income is nil ( taxable income amount- which is after deducting the personal allowance) or the original gross amount.
Please advise.
Regards,
Alwin TomThe tax credits on interest income are based on the amount of income, hence £800 bank deposit interest received has suffered £200 tax so the tax credit will be £200 and this will be deducted from the tax liability irrespective of the amount or make up of the taxable income and may result in a tax repayment.
To begin with the notional tax credit is also based on the dividend income but the tax credit is limited to the amount of dividend income which is actually taxable ie after deduction of the PA. This is a very unusual scenario however as it would mean that the PA is bigger than both the non savings income and savings income combined! If therefore a taxpayer’s only income was a dividend received of £54,000, this would gross to £60,000 but when the PA is deducted it leaves taxable income of £50,000 thus the tax credit to deduct would be limited to £5,000 not £6,000.
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