Q117 BPP

Hi,

Samson – Income tax computation 2022/23

…………………………………………………Non-savings income…..Savings income…..Total………………………….
Employment income – Salary………..112,000…………………………………………………………………………………
Building society interest .£9,600/2…………………………………4,800…………………………………………………….
Net income………………………………….112,000…………………..4,800…………………..116,800…………………….
Less personal allowance (W)…………(4,170)
Taxable income=112,630

Calculate Samson’s income tax saving for the tax year 2022/23 if the building society deposit account had been in Delilah’s sole name instead of in joint names for the entire year

(building society interest is currently divided equally between samson and delilah (wife))

If the building society deposit account had been in Delilah’s sole name instead of in joint names for the entire year, this would have saved Samson income tax of £2,680 (£500 × 20% + £4,300 × 60%).

Samson’s effective marginal rate on the savings income covered by the savings income nil rate band (£500) is 20%. This is 40% of half of the £500 (ie 20% of the whole of the £500) of the savings income which was used to restrict the personal allowance. Samson’s effective marginal rate of income tax on the savings income not covered by savings income nil rate band (ie £4,800 – 500 = £4,300) is 60%. This is 40% (the higher rate) plus 40% of half (ie 20% of the whole) of the remaining £4,300 of savings income which was used to restrict the personal allowance

I couldnt understand how we come up with income tax saved of 2680 , is it possible to simplify the above reasoning , i didnt understand how we computed (£500 × 20% + £4,300 × 60%).

thanks