Practice assesment 2 1.4

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PeterF1993
PeterF1993 Registered Posts: 2
in Personal Tax
Hello.
I am convinced the answer to this question is wrong. Could anyone confirm or advise where I am going wrong?

This is personal tax practice assesment 2 1.4 (b)

So Bobby is a higher rate tax payer therefore entitled to £500 savings allowance @ 0%

So the remaining 3700 @ 40% would be £1,480 however the official answer on the AAT website is £1,080

Am I missing something obvious here?

Thanks.

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  • PeterC
    PeterC Registered, Tutor Posts: 245 Dedicated contributor 🦉
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    £47,500 (employment) - £12,500 (PA) = £35,000
    This leaves £2,500 basic rate band

    £4,200 savings:
    £500 allowance
    leaves £2,000 @ 20% = £400
    remaining £1,700 @ 40% = £680

    400 + 680 = £1,080
  • PeterF1993
    PeterF1993 Registered Posts: 2
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    Thank you very much!
    All clear now.
  • PeterC
    PeterC Registered, Tutor Posts: 245 Dedicated contributor 🦉
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    You're welcome
  • Nadeem_M
    Nadeem_M Registered Posts: 5 New contributor 🐸
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    @PeterC Slightly confused by this, there's £2,500 left on the basic rate band, so my thought's would be;

    £4,200 less 500 (savings allowance) which leave's 3,700 to be taxed. £2,500 @ 20% & £1,200 @ 40%

    In this question do we take the savings allowance off the basic band to bring it down to £37,000?

    I can't remember ever taking the saving's allowance off the basic band in previous questions :(
  • PeterC
    PeterC Registered, Tutor Posts: 245 Dedicated contributor 🦉
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    The savings allowance (and the dividend allowance) use up whatever tax band they are in. There is an example of this, for dividends, at SAIM1110 https://gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim1110

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