ATXP6 UK
Syllabus A1. Income tax A1a. Property and investment income

A1a. Savings income starting rate band

Savings income starting rate band

There is a tax rate of 0% for savings income within the savings income starting rate band (£5,000) (don't confuse this with the Savings income nil rate band, that you have seen in the previous topic)

The savings income starting rate only applies where the savings income falls wholly or partly below the starting rate limit.

Keep in mind that income tax is charged first on Non-savings income.

The savings income starting rate band counts towards the basic rate limit of £34,500.

Example (using the Saving starting rate band)

Peter has a trading income of £13,000 and savings income of £9,000.

Calculate Peter's tax liability.

  • Solution

    NSI
    13,000 - PA 11,850 = £1,150 x 20% = £230

    SI
    Savings income starting rate band: £5,000 - £1,150 = £3,850 x 0% = £0
    Savings nil rate band - basic rate taxpayer = £1,000 x 0% = £0
    (£9,000 - £3,850 - £1,000) = £4,150 x 20% = £830

    Tax liability = £230 + £830 = £1,060

    Note: 
    We used the Savings starting rate band here because the Non-savings taxable income was below £5,000. In fact, it was £1,150, therefore we could still use £3,850 (5,000 - 1,150) savings starting rate band and use 0% rate.

Example (where you can't use the Saving starting rate band)

Peter has a trading income of ££46,350 and savings income of £9,000.

Calculate Peter's tax liability.

  • Solution

    NSI
    46,350 - PA 11,850 = £34,500 x 20% = £6,900

    Peter is a higher rate taxpayer since his Total taxable income is more than £34,500 (£34,500 + £9,000 = £43,500).

    SI
    Savings nil rate band - higher rate taxpayer = £500 x 0% = £0
    (£9,000 - £500) = £8,500 x 40% =£3,400

    Tax liability = £6,900 + £3,400 = £10,300

    Note: 
    We could NOT use the Savings starting rate band here because the Non-savings
    taxable income was more than £5,000. In fact, it was £34,500