Osborne 3: Income from Savings & Investments

Question 1

Categories of income

General Income
Savings Income
Dividend Income

Answer 1

General Income is any income that is not savings or dividends

Question 2

Total Income

Use this to see if someone is HR taxpayer.

Total all income (don’t deduct PA)
If above 50K - HR taxpayer
If above 100K - AR taxpayer

I feel you need to do this to see if they are AR taxpayer BEFORE you take off PA …. because PA might not be 12,500

Then it seems to be custom to not show the 0% allowance in the General section of the calculation
even though you show the … @ 0% for the other allowances..
so normally you will see 37,500 @ 20%
unless PA is reduced

Answer 2

.

Question 3

Remember AR tax is above £150K

Don’t confuse with the £100K amount after which PA is reduced

Answer 3

.

Question 4

ISA rules (not in ref mat)

Answer 4

Age 16 for cash isas
Age 18 for S&S & Innovative finance isas

Cannot invest in more than 1 cash and 1 S&S in 1 year.

Cannot move partial amounts in current year.

Flexible ISA can withdraw and reinvest

Question 5

What to watch out for ???

Answer 5

DATES !!
If given a list of amounts received by a client
..Look at dates first to see whats relevant to THIS tax year.

Question 6

If doing the full 3 steps:

Computation
Listing total income & showing PA deduction & taxable income

Analysis of Income (into the 3 categories)

Tax calculation

what to remember?

Answer 6

In the analysis you show the general amount net of the PA.

I think basically the PA is not taxable so doesn’t appear in either the analysis or calculation.

Unlike the Savings & Divs allowances which ARE ‘taxable’ … just at 0%. …. need to put those in the calc because eg. the £1000 savings allowance impacts the amount of divs at 7.5% … if you didn’t put in the £1000@0% you wouldn’t arrive at the right amount of div tax..

Question 7

Like PA … ISA interest is ‘not taxable’ …. as opposed to taxed at 0%

Answer 7

So it doesn’t appear in the Analysis or Calculation sections.

Question 8

It appears you CAN use personal allowance not used by employment income against interest & dividends. (I know from elsewhere you can’t use it for capital gains)

This doesn’t fit well with the way Osborne does the computation - ie. deducting personal allowance from General income and then doing the analysis but I suppose I could manage it.

Answer 8

From Gov.uk

Personal Allowance
You can use your Personal Allowance to earn interest tax-free if you have not used it up on your wages, pension or other income.

You do not pay tax on any dividend income that falls within your Personal Allowance (the amount of income you can earn each year without paying tax).

Question 9

SOPHIE HAS DIVIDEND 4700
500 of thi in higher rate band and rest in additional

calculate tax

Answer 9

in kaplan - this still meant factoring in the 2k allowance meaning that the answer was tax 2700 at additional rate of 38.1

Question 10

if asked for taxable employment income and given bits
company pension
payroll giving
gift aid
personal pension
reimbursed expenses

how to handle

Answer 10

for taxable income just deduct
payroll giving and company pension. (net amount ..dont gross up)

gift aid and pp get tax relief but they are included as taxable income and the tax bands are adjusted