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Hi,
1. I do not understand why the £40,000 saving income has been charged as:
£20,000 @ 40%
£20,000 @ 45%Why is it not:
£34,500 @ 20% then
£5,500 @ 40%?2. Also for dividends; why is it £34,000 @ 38.1%?
is it not
2000 @ 0% then
£34,000 @ 7.5%?These queries are based on looking at how despite the NSI being in the higher tax rate range, it still charged 20% up to the basic pay rate limit of £34,500.
Please help my confusion out
Thanks.The error I regret is yours – the statement you make is entirely wrong. There is one basic rate band which is applied to NSI first and here is used in full by the NSI. The dividend income nil rate band is available however irrespective of what level of income the taxpayer may have.
Have you worked through the lectures that accompany these notes and examples?But if the dividend income is £36,000 then is it not in the higher rate tax band so will be charged 32.5%? Isn’t 38.1% for additional rate tax band?
so the total taxable income even if it is broken down into different income, has one basic rate band limit and one higher rate band limit and one additional rate band limit applied first to NSI, then SI, and dividend income (if any left)?
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