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basic rate is 0 – 34,500
higher rate is 34,501 – 150,000 i.e range of £115,500
if we extend the basic rate by £8000 so its £42,500 do we add the higher rate range of £115,500 or does the higher rate range actually get reduced by £8000 because we tax £8000 at 20% instead of the 40%, i.e more at 20% than 40% by the amount of gross gift aid donation?
Therefore, if your an additional tax rate payer, where both the basic rate and higher rate will be extended by the gross aid donation (in this case £8,000), you would have the same initial higher rate range of £115,500 because both basic rate increased by £8,000 to £42,500 and the higher rate limit increased by £8,000 to £158,000
(W2) in the answer clearly shows the extension of BOTH the BRB and HRB limits
so if only the basic rate tax limit was extended, then effectively the initial gap from basic to higher rate (i.e £34,500 to £150,000 – so £115,000 difference) is reduced by the amount basic rate limit is extended?
No! The answer clearly shows in W3 that the higher rate band is the same 115,500 – as I said in previous answer and put in capitals – BOTH the BRB and HRB limits are increased
I know that, but I’m just saying in a hypothetical situation where only the basic rate tax would be extended, the effective gap between the basic rate and the higher rate which is usually £115,000 (£34,500 – £150,000) would actually be less by the gross amount of charity donation made right?
No. There is no hypothetical situation- both BRB and HRB limits are extended by the same amount. If the taxpayers’ income falls between the revised limits then only the BRB limit is relevant in the tax calculations you perform