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Came across the following example:
Taxable Non-Saving Income: $33,950
Taxable Saving Income: $5,550
Total Taxable Income: $39,500
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?
You need to watch the lectures and read the study notes – chapter 2 – then you would be able to answer this question