SAIM1110 - Savings and investment income: tax on savings and investment income: example
Example
In the tax year 2011-12 Jane has income of £33000 from employment, and savings income in the form of net building society interest of £800 and dividends of £9000. The personal allowance for 2011-12 is £7475 and the threshold for higher rate tax is £35000. The 10% starting rate for savings income limit is £2560.
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%. The starting rate for savings does not apply because non-savings income fully occupies the first £2560 of chargeable income. Her tax liability in 2011-12 is as follows:
| Income | ||
| Employment | 33000 | |
| Interest | 1000 | |
| Dividends | 10000 | [9000+(9000 x 1/9)] |
| Less personal allowance | (7475) | |
| Taxable | 36525 | |
| Tax | ||
| 255255 @ 20% | 5105 | |
| 1000 @ 20% | 200 | |
| 8475 @ 10% | 847.50 | |
| 1525 @ 32.5% | 495.62 | |
| Total | 6448.12 | |
| Less tax at source on interest | (200) | |
| Less tax credit | (1000) | |
| Tax payable | 5248.12 |

