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Dear,
When a higher rate tax payer needs to also face AA charge, I understand his marginal rate has to be used in deriving the AAC.
But what if, his total taxable income is very close to the additional rate band limit such that Taxable income + AAC lead to fall in the Additional rate band limit, which rate (40 or 45%) should be used to compute the tax liability of the AAC?
Thank you for you help.
The marginal rate(s) simply means the rate(s) that would apply when adding the AA charge to the taxpayers’ existing figure of taxable income. Therefore if the taxpayer was already a higher rate taxpayer and had 20,000 of his higher rate band still available the first 20,000 of the AA charge would be taxed at 40% with the remainder falling into the additional rate band being taxed at 45%
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