Dear Tutor
Come across this question in the article, example 6. Would like to know if based on calculation is the below tax liability correct.
EXAMPLE 6
Samuel and Samantha are a married couple. For the tax year 2020-21, Samuel will have a salary of £90,000. Samantha will have a salary of £30,000 and savings income of £1,500.
Samuel is a higher rate taxpayer, so his savings income nil rate band is £500. Transferring sufficient savings to Samuel so that he receives £500 of the savings income will therefore save income tax of £100 (500 at 20%) for 2020-21. - I am not quite sure, how it can result in saving of £100
Employment income $90,000.00
Transfer of allowance $(1,250.00)
Personal allowance (12,500.00)
Taxable income $76,250.00
Income Tax
$37,500.00 20% $7,500.00
$38,250.00 40% $15,300.00
$500.00 0% $-
Tax liability $22,800.00
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TXFinance Act - Tax planning for Marriage couple Continue
Can any assist me on this. Thank you
Is it because the £500 over the personal savings allowance of Samantha (which would be £1000 since she is a basic rate tax payer) would have resulted in her paying tax at rate of twenty percent on this income. In other words £500 (0.20 x500 = £100). Since this is covered by Samuel's savings allowance this results in a tax saving for the couple of £100. Hope this helps.
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