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HI sir! i just wanna ask about example 7 of savings income in income tax. if 500 is already taxed at 0% then why is the remaining 11500 split into 6500 which is taxed at 20% and 5000 taxed at 40%? shouldnt we have just taxed it at 11500@20%?
Look again at the example and answer – the taxpayer only has 7,000 of the basic rate band available after taxing the non savings income! As the taxpayer IS a higher rate taxpayer only 500 savings nil rate band is available leaving just 6500 basic rate band available with the remaining taxable income falling in the higher rate band.
If this is still a problem for you then you need to go back to the OT course notes and lectures to get a greater knowledge of how the system works