Personal Tax and the 10% Savings Rate- please help


I have my personal tax exam in a couple of weeks and the one thing I'm really struggling to get my head around are the rules for when to apply the Savings Allowance and tax the first £2,880 of savings income at 10%?

Can somebody please just give me some bullet points about when this should and should not be applied? The Osbourne books don't really explain it that well, or maybe i'm just having a mental block!

Thanks in advance for your help :)



    SACKERS Registered, Tutor Posts: 11 New contributor ?
    The 10% savings rate applies when taxable savings income falls in the first £2,880 of income.
    In an income tax computation you should analyse income as follows:
    1.Non Savings( employment income, property income)
    2.Savings (interest)
    The personal allowance is deducted and Income is taxed in that order.

    If Taxable non savings income is less than £2,880 then any savings income will be taxed at the 10% starting rate.

    Eg Tom has employment income of £10,500 and receives building society interest of £2,000 in 2014/15 his tax computation would be as follows:

    Non Savings Savings Total
    Employment income 10,500 10,500
    BSI 2000 x 100/80 2,500 2,500
    Total income 10,500 2,500 13,000
    Personal allowance (10,000) (10,000)
    Taxable income 500 2,500 3,000
    Tax liability
    Non savings 500 x 20% =100
    Savings(2880-500)= 2380 x 10% = 238
    Savings(2500-2380) = 120 x 20% = 24
    Total 3000 362

    Hope this helps
    SACKERS Registered, Tutor Posts: 11 New contributor ?
    The above computation as an image

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