SAIM1110 - Savings and investment income: tax on savings and investment income: example for tax years up to and including 2007/08

Example

Jane has income of £30000 from employment, and savings income in the form of net building society interest of £800 and dividends of £9000. The personal allowance for 2006-07 is £5035, the starting rate band covers income up to £2150, and the threshold for higher rate tax is £33300.

The dividends are taxed as the highest part of income and are taxed partly at the dividend ordinary rate of 10% and partly at the dividend upper rate of 32.5%. The building society interest is the next highest part of total income and is taxed at the savings rate of 20%. Her tax liability in 2006-07 is as follows: