Chapter 3 - Investment Income

Question 1

Starting Rate

Answer 1

If Non-savings income below £5k:

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 (Purchasing Gilts)

Answer 6

If SELLING Gilts: (Giving money to the govt to receive interest)

Calculate Interest Received (calendar year only)
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 purchase)