In the solution for practice question 1, why was the remainder of the Dividend thus: 5000.00 divided into Basic rate and higher rate instead of just using the high rate of 33.75%

Is there an error I’m example #2? The non savings taxable income of £14,930 exceeded £5000 therefore the savings nil rate band should not be applicable. I’m confused.

I am not in a position to watch the lecture at the moment. However, it is TAXABLE non savings income that can’t be over £5000. If it is over this limit then the savings stater rate is wiped out. See following link for details-

The £1,000 deducted is based on this rule (2): For basic rate taxpayers, the savings income nil rate band for the tax year 2022-23 is £1,000, and for higher rate taxpayers it is £500. Additional rate taxpayers do not benefit from any savings income nil rate band.

The one you got confused with is this rule (1): Savings income benefits from a 0% rate. However, the starting rate only applies where savings income falls within the first £5,000 of taxable income. If non-savings income exceeds £5,000, then the starting rate of 0% for savings does not apply. Savings income in excess of the savings income nil rate

If you look at Example 4, might have a better understand, if rule (2) applies, the taxpayer would get a £5,000 deduction.

J8542, I have not watched the video. I suspect you are right in the main. However, you are wrong when you say if non-savings income is greater than £5000 that the savings starter rate does not apply. I will quote directly from government site from link I gave above-

“If your other income is less than £17,570

Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.

Example

You earn £16,000 of wages and get £200 interest on your savings.

Your Personal Allowance is £12,570. It’s used up by the first £12,570 of your wages.

The remaining £3,430 of your wages (£16,000 minus £12,570) reduces your starting rate for savings by £3,430.

Your remaining starting rate for savings is £1,570 (£5,000 minus £3,430). This means you will not have to pay tax on your £200 savings interest.” If TAXABLE non-savings income is greater than £5000 the savings starter rate will be unavailable.

mrjonbain, I copied the text straight from the manual. And I believe we are both correct.

“the starting rate only applies where savings income falls within the first £5,000 of taxable income” In order to have a taxable income of £5,000: £12,570 (personal allowance) + £5,000 which is £17,570.

To be more accurate, the text that I quoted could be “If taxable non-savings income exceeds £5,000, then the starting rate of 0% for savings does not apply.”

Thanks for your input, I have a better understanding now 🙂

In example 13, how will Elliot benefit? If the tax band hadn’t been extended to 39700, she would be paying 7540 but with increased band she will be paying 7940. That’s a 400 pound increase in tax liability.

In example number: 14 Adjusted net income exceeds 125,140 and 15 Adjusted net income exceeds 100,000 Why there is a difference it should be the same as the example number 14/ £ 125,140.

hello in example 16 (Elton and david) david’s tax liability becomes nil when he uses his personal allowance (10000-12570=nil), so why doesn’t elton also use his personal allowance to be rid of his liability i.e. his 10000-12570…?

The election is only available when both taxpayers are either just basic rate taxpayers or non-taxpayers. The election is only likely to be made when one spouse is a non-taxpayer and has an amount of unused PA that would otherwise be wasted and the other spouse is only a basic rate taxpayer.

Given that Elton is a higher Tax Payer, this election isn’t possible

Tax will provide you with a good foundation – but you fill find the ATX syllabus has a lot more content. I would suggest investing in some learning content as well as revision kit.

8.75% rate is applicable up to the BRB limit of £40,200 (refer to W1). Look at the “Income Tax” computation section in the answer and add up all income above and including £2,270, you will get £40,200 in total. The remaining part of the dividend income is taxed at the higher rate.

I am planning to sit for ATX-UK next. Since the lectures of ATX are not available, I am planning to watch lectures for TX-UK and then solve revision kit for ATX-UK. Just needed your guidance if I am on the right path. Thanks for the lectures.

Tax will provide you with a good foundation – but you fill find the ATX syllabus has a lot more content. I would suggest investing in some learning content as well as revision kit.

damiloladeyemi247 says

Please how do we arrive at 22,270 @ 20% for Example 3 when calculating the Tax liability

Kabby says

In the solution for practice question 1, why was the remainder of the Dividend thus: 5000.00 divided into Basic rate and higher rate instead of just using the high rate of 33.75%

shari993 says

Is there an error I’m example #2? The non savings taxable income of £14,930 exceeded £5000 therefore the savings nil rate band should not be applicable. I’m confused.

stvincent89 says

Exactly the question I had as well.

mrjonbain says

I am not in a position to watch the lecture at the moment. However, it is TAXABLE non savings income that can’t be over £5000. If it is over this limit then the savings stater rate is wiped out. See following link for details-

https://www.gov.uk/apply-tax-free-interest-on-savings

J8542 says

The £1,000 deducted is based on this rule (2):

For basic rate taxpayers, the savings income nil rate band for the tax year 2022-23 is £1,000,

and for higher rate taxpayers it is £500. Additional rate taxpayers do not benefit from any

savings income nil rate band.

The one you got confused with is this rule (1):

Savings income benefits from a 0% rate. However, the starting rate only applies where savings

income falls within the first £5,000 of taxable income. If non-savings income exceeds £5,000,

then the starting rate of 0% for savings does not apply.

Savings income in excess of the savings income nil rate

If you look at Example 4, might have a better understand, if rule (2) applies, the taxpayer would get a £5,000 deduction.

mrjonbain says

J8542, I have not watched the video. I suspect you are right in the main. However, you are wrong when you say if non-savings income is greater than £5000 that the savings starter rate does not apply. I will quote directly from government site from link I gave above-

“If your other income is less than £17,570

Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.

Example

You earn £16,000 of wages and get £200 interest on your savings.

Your Personal Allowance is £12,570. It’s used up by the first £12,570 of your wages.

The remaining £3,430 of your wages (£16,000 minus £12,570) reduces your starting rate for savings by £3,430.

Your remaining starting rate for savings is £1,570 (£5,000 minus £3,430). This means you will not have to pay tax on your £200 savings interest.” If TAXABLE non-savings income is greater than £5000 the savings starter rate will be unavailable.

J8542 says

mrjonbain, I copied the text straight from the manual. And I believe we are both correct.

“the starting rate only applies where savings income falls within the first £5,000 of taxable income”

In order to have a taxable income of £5,000:

£12,570 (personal allowance) + £5,000 which is £17,570.

To be more accurate, the text that I quoted could be “If taxable non-savings income exceeds £5,000, then the starting rate of 0% for savings does not apply.”

Thanks for your input, I have a better understanding now 🙂

cynthiahylary says

Hi there ,the working of example 6 part 2 ( the example that has Daisy), if possible, i would like to know how the 230GBP and 12,270 came to be?

thank you in advance

FatimaNazir says

In example 13, how will Elliot benefit? If the tax band hadn’t been extended to 39700, she would be paying 7540 but with increased band she will be paying 7940. That’s a 400 pound increase in tax liability.

samiullahrabnai says

In example number:

14

Adjusted net income exceeds 125,140 and

15

Adjusted net income exceeds 100,000

Why there is a difference it should be the same as the example number 14/ £ 125,140.

Farwazahra says

hello

in example 16 (Elton and david) david’s tax liability becomes nil when he uses his personal allowance (10000-12570=nil), so why doesn’t elton also use his personal allowance to be rid of his liability i.e. his 10000-12570…?

Amoury says

The election is only available when both taxpayers are either

just basic rate taxpayers or non-taxpayers. The election is only likely to be made when one spouse is

a non-taxpayer and has an amount of unused PA that would otherwise be wasted and the other

spouse is only a basic rate taxpayer.

Given that Elton is a higher Tax Payer, this election isn’t possible

chughtai20 says

What is the admin chapter the tutor keeps referring to ? I studied the first chapter and I didn’t see any p60 or p11d.

incepaul says

Tax will provide you with a good foundation – but you fill find the ATX syllabus has a lot more content. I would suggest investing in some learning content as well as revision kit.

Andrea says

Hello – Is there any reason why I cant see the lectures? I’m just starting on lectures chapter 2

opentuition_team says

No idea, try another browser or device, video works fine

dheeramungur says

Yes it’s blur when opened on laptop however on Mobile it’s clear

roshpatel says

Hi,

In practise question 1 – Kate.

how did we get the £2,270 x 8.75% for dividends?

akazakov says

8.75% rate is applicable up to the BRB limit of £40,200 (refer to W1). Look at the “Income Tax” computation section in the answer and add up all income above and including £2,270, you will get £40,200 in total. The remaining part of the dividend income is taxed at the higher rate.

sabazareem says

In Example 12, after applying basic tax rate of 20% on 37700, we didn’t apply nil rate band (500 @ 0%) as Kathy is a high rate tax payer

SabaZareem says

Sorry i got that. No savings income

Naseam says

Question 3 of the practice questions – my income tax liability came to 56,638?

jealogy says

I got this too. Must be a typo or something since 56,638 is indeed the sum of everything on Practice Answers.

Shub says

Hi Mam,

I am planning to sit for ATX-UK next. Since the lectures of ATX are not available, I am planning to watch lectures for TX-UK and then solve revision kit for ATX-UK. Just needed your guidance if I am on the right path.

Thanks for the lectures.

incepaul says

Tax will provide you with a good foundation – but you fill find the ATX syllabus has a lot more content. I would suggest investing in some learning content as well as revision kit.