2.4 Taxation of Non Savings, Savings and Dividend Income – Example 10 query

Hello,

In the lecture video titled “2.4 Taxation of Non Savings, Savings and Dividend Income” – at around 46:00 into the video when the lecturer is working through Example 10 – I have a query on these workings.

The lecturer notes that a £500 nil-rate band allowance is available for a higher rate tax payer, then in the calculations, £37,700 of Non-Savings Income is taxed at 20%.

I thought that as the £500 nil-rate band was being used, then this meant £500 was used towards the £37,700 Basic Rate threshold? (Meaning that only £37,200 would be taxed at 20% – and this would push an extra £500 of Non-Savings Income into a 40% tax rate).

Or is it as the entire £37,700 of the Basic Rate threshold is used in Non-Savings Income this is calculated before considering the £500 nil-rate band Savings Income allowance?

Here is a summary of the lecturer’s workings:

Non Savings Income:
£37,700 x 20% = £7,540
£54,730 x 40% = £21,892

Savings Income:
£500 x 0% = £0
£3,500 x 40% = £1,400

Tax Liability = £30,832

But here are my workings (based on using £500 nil-rate band in the £37,700 threshold):

Non Savings Income:
£37,200 x 20% = £7,440
£55,230 x 40% = £22,092

Savings Income:
£500 x 0% = £0
£3,500 x 40% = £1,400

Tax Liability = £30,932

Which is correct and why?

Hopefully my question makes sense – apologies for making it so long winded.

Thank you for your help.

Charley