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