Chapter 3 - Investment Income

Question 1

Starting Rate

Answer 1

The first £5,000 combined with Non-Savings Income is tax free e.g.
If non-savings Taxable income is £2.6k, then £2.6k non savings will be 20%, and £2.4k savings income will be 0%

Question 1

Tax Income Computation

Answer 1

Split into three Columns:
Non Savings Income, Savings Income, Dividends

Question 2

Nil Rate Bands

Answer 2

The next bunch is tax free for savings Income is free as below (based on taxable income):
Basic rate - the next $1k
Higher rate - the next $500

Question 3

Personal Allowance

Answer 3

If the non-savings Income is below $12.57k, then the PA goes across Non-savings and Savings

Question 4

Splitting into bands

Answer 4

Treat Earnings, Savings and Dividends income as the bands together:
E.g. if Trading Income is $43k, and savings is $7,850 then:
PA will fully come off the $53k Trading Income

Taxable Income is $38,280:
First tax band: $30,430 of Non-savings = 20%
Higher rate so $500 at 0%
The next 6,770 is 20%
That totals $37,700

and the remaining savings income of 580 is at 40%

Question 5

Dividend Income

Answer 5

Always $1k exempt
Basic band: 8.75%
Higher rate: 33.75%
Additional rate: 39.35%

Question 6

Accrued Income Scheme

Answer 6

If SELLING Gilts:

Calculate Interest Received
Add Interest included up to sale
This is the total intersesst income assessable to the person

If BUYING Gilts:

Interest received
Deduct: Interest included in cost of purchase (pre pruchase)