Savings Income Starting Rate

Sstasi15y ago

Hi:
I’m confused about the savings income rate of 10%. See attached file of Question from BPP book. I am confused about the circled area.

I would have thought that since savings income is more than 2440 you’d use the 20% (basic rate) against the entire taxable income amounts i.e. 20% * 6025

It seems as if you’re looking at the value of non-savings income being less than 2440. Shouldn’t it be that u look at the value of SAVINGS income to see if that is above 2440???

Please explain why you have to split it up like in the circled area.

Thanks

TTTax Tutor15y ago#1

Savings income is taxed at 10% it there is any remaining starting rate band after taxable non savings
In the example above the taxable non savings has used up £1025 of the £2440 starting rate band so there is £1415 available for the 10% rate on savings. The savings in excess of £1415 is at 20%
Hope this helps

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