# Investment and savings allowances

Madnatter
AAT Student Posts:

**6**
Hi sorry for the long post to follow but I need advice as I have an exam in 2 weeks and my tutor has given me two contradicting ways of doing things. Right so studying personal tax level 4. Two weeks ago we were taught to work out how much allowance for savings a tax payer recieves by adding general income, savings and dividends together to see whether the person is basic or high tax payer..

Example 1 - Joe Bloggs earns 25000 general income, 3000 savings income and 7000 dividend income. So we add them all together to get 35000 which means this person is a higher tax payer, over 32000, and only receives the 500 savings allowance.

But this week we were taught:

Example 2 - Jane Doe earns 145000 general income, 5000 savings and 10000 dividend income. But because she earns only 1450000 general income then she gets 500 savings allowance....

My issue is why do we not add all three up which means she would earn over 150000 and not be entitled to any allowance as we have in example 1. If we did Joe Bloggs as per example 2 he would get 1000 savings allowance as he only earns 25000 general income which is below 32000 bracket. My question is what instance is correct? I dont want to get it wrong in the exam but the tutor could not give me a correct answer. Can anyone help me and shed some light on this for me? Do you calculate tax bracket on General income only or all three added together? TIA

Example 1 - Joe Bloggs earns 25000 general income, 3000 savings income and 7000 dividend income. So we add them all together to get 35000 which means this person is a higher tax payer, over 32000, and only receives the 500 savings allowance.

But this week we were taught:

Example 2 - Jane Doe earns 145000 general income, 5000 savings and 10000 dividend income. But because she earns only 1450000 general income then she gets 500 savings allowance....

My issue is why do we not add all three up which means she would earn over 150000 and not be entitled to any allowance as we have in example 1. If we did Joe Bloggs as per example 2 he would get 1000 savings allowance as he only earns 25000 general income which is below 32000 bracket. My question is what instance is correct? I dont want to get it wrong in the exam but the tutor could not give me a correct answer. Can anyone help me and shed some light on this for me? Do you calculate tax bracket on General income only or all three added together? TIA

0

## Comments

376Total income is £160,000.

Taxable income is £160,000 as there is no personal allowance (total being over £122,000)

It doesn't matter how it is labelled, if it isn't exempt it is taxable.

6376What book was the example taken from?

637632000 X 20%

113000 X 40%

Savings -

5000 X 40%

Dividends -

5000 X 0%

5000 X 38.1%

Is what I get to.

63766