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Basic / Higher Rate of Tax (Saving Income)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Basic / Higher Rate of Tax (Saving Income)

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Tax Tutor.
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  • Author
    Posts
  • May 6, 2021 at 10:09 am #619846
    st3km3ng
    • Topics: 1
    • Replies: 0
    • ☆

    Came across the following example:

    Questions:
    Taxable Non-Saving Income: $33,950
    Taxable Saving Income: $5,550
    Total Taxable Income: $39,500

    Solution:
    Non-Saving Income Tax = $33,950 x 20%
    Saving Income Tax = $500 x 0% (Saving Income Nil Rate Band)
    = $3,050 ($37,500 – $33950 – $500) x 20%
    = $2,000 ($$5,500 – $500 – $3,050) x 40%

    My question is why did the author use the higher rate taxpayer of saving income nil rate band ($500), when he use the basic taxpayer rate of 20% in the non-saving income.

    How do I justified whether an individual is a basic OR higher rate taxpayer when applying the saving income nil rate band?

    May 9, 2021 at 9:43 am #620130
    Tax Tutor
    • Topics: 2
    • Replies: 3929
    • ☆☆☆☆☆

    You need to watch the lectures and read the study notes – chapter 2 – then you would be able to answer this question

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