Chapter 3 - Taxation of Interest

Question 1

Where is interest added in the tax calculations?

Answer 1

To non-savings income to increase net income and thereafter taxable income

Question 2

True or false

All UK bank and building society interest is paid gross

Answer 2

True - no tax is deducted at the source

Question 3

True or false

Interest credited to NS&I accounts & government stocks are not received gross

Answer 3

False - these accounts are received gross

Question 4

When is interest taxed?

Answer 4

After non-savings income i.e after any employment income or rental income

Question 5

What is the basic rate income savings allowance?

Answer 5

£1,000

Question 6

What is the higher rate income savings allowance?

Answer 6

£500

Question 7

What is the additional rate income savings allowance?

Answer 7

£0

Question 8

Where does the 0% starting rate apply?

Answer 8

Where the taxable non-savings income is less than £5,000

Question 9

Where taxable non-savings income is less than £5,000 & the tax payer has some interest, what happens?

Answer 9

1. the taxable non-savings income is taxed at 20%
2. the difference between the taxable non-savings oncome & £5,000 is taxed at 0%