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PLTX - confused re starting rate and savings allowances

StudymeisterStudymeister Registered Posts: 4
Hello, I'd be really grateful if someone could please help me solve this question, and explain how they did it. I was under the impression from one book that a taxpayer is entitled to both from the following scenario but another book explains starting rate and savings allowance differently, so now very confused!
George has taxable non-savings income of £3,450, and taxable savings income of £24,000 for tax year 2019/20. What is his total income liability? My workings:
NSI 3450 @ 0%
SI starting rate 1550 @ 0%
SI savings allowance 1000 @ 0%
SI taxable (24000-12500-1550-1000) = 8950 @ 20% = 1790.




Answers

  • Duchess1Duchess1 MAAT Posts: 76
    edited May 2020
    Hi. I found that this wasn't explained well in the Osborne books at all & at the time I had to google it. Have a look at this;- https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim1080

    Savings income is taxable at the basic rate, except where it falls within the ‘starting rate limit for savings’ (for 2019-20 this amount is £5,000 - ITA07/S12) or is covered by the personal savings allowance (see below). Where it does so, income tax is charged at the ‘starting rate for savings, which is 0% (ITA07/S7).
  • StudymeisterStudymeister Registered Posts: 4
    Thanks for the link Duchess. If i read the paragraph properly, it would seem to be either the savings allowance or the starting rate but not both in my scenario where NSI is below Personal Tax Allowance. My provider's student book doesn’t agree (or explain it clearly either), although the other textbook I look at does agree! :s
  • Duchess1Duchess1 MAAT Posts: 76
    I would think as follows;

    non savings income £3,450 is covered by personal allowance, so no tax due on this amount
    as the income is below the personal allowance of £12,500

    tax on £24,000 savings is as follows;
    £5,000 @ 0%
    £19,000 @ 20%
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