Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)

Investment and savings allowances

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


  • BertieBertie West Midlands Registered Posts: 376
    Example 2 is wrong.

    Total 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.

  • MadnatterMadnatter AAT Student Posts: 6
    Thank you this is what I thought but tutor was adamant both were right. Thanks Bertie
  • BertieBertie West Midlands Registered Posts: 376
    Nope, your tutor is definitely wrong.

    What book was the example taken from?
  • MadnatterMadnatter AAT Student Posts: 6
    I have no idea I couldnt find an example of example 2 in my text book which is osbornes books. He just said thats how he got taught it???
  • BertieBertie West Midlands Registered Posts: 376
    From your example -

    32000 X 20%
    113000 X 40%
    Savings -
    5000 X 40%
    Dividends -
    5000 X 0%
    5000 X 38.1%

    Is what I get to.
  • MadnatterMadnatter AAT Student Posts: 6
    Yes thats what I got, tutor put 500 savings allowance in and I questioned it.
  • BertieBertie West Midlands Registered Posts: 376
    You should take his job!
  • MadnatterMadnatter AAT Student Posts: 6
Sign In or Register to comment.