Understanding old tax bands

Bea787

Thank you - have been there but the historical records there are rates for income not savings I think

PlutoinCapricorn

The page contains the savings info too.

jem16

PlutoinCapricorn wrote: »

The page contains the savings info too.

It only gives information on the 10% rate. It does not give information for the 20% rate of savings when income was taxed at 22% which is what the OP is trying to clarify.

EDIT - OP this should give you all you need to clarify rates.

Go to http://www.ifs.org.uk/fiscalFacts/taxTables and then click Income Tax under Direct Taxes. This will link to an Excel spreadsheet. At the bottom of the spreadsheet it has 2 tabs - click the one which says Rates and Limits. This will give all the rates of income tax from 1973. If you scroll right down to the bottom you will find the paragraph starting Different Tax Rates. In there it explains that the basic rate of tax on savings has been 20% since 1996 and from 2009/9 the basic rate of income was aligned with this.

Bea787

One more query (last one I hope!) - re the 10% band changes. I now think I understand this but from what I understand this would mean that from 08-09 onwards (including that year) the taxable income would be worked out by deducting the PA from earnings alone, and prior to that year it would be worked out from total income - PA.

However, my tax calculations show the earnings only being used from 2010-2011 onwards, so the total figure has still been applied to 08-09 and 09-10 when I think earnings only should have been used.

Am i missing something or is this an error?

Thanks again (the last link was a great help). Have also worked out how to thank people for replies!:T

jem16

Bea787 wrote: »

However, my tax calculations show the earnings only being used from 2010-2011 onwards, so the total figure has still been applied to 08-09 and 09-10 when I think earnings only should have been used.

Am i missing something or is this an error?

It only matters when earnings are less than the personal allowance plus the 10% band. If earnings are over that in any case it makes no difference. It also doesn't matter if there was no savings interest to take into account as the 10% rate is only for savings interest and only applies in certain cases.

Bea787

The 10% rate aside though Jem I think it does make a difference. My earnings are more than PA + limit, but I worked out the tax I would owe using both approaches - (deducting PA from total income and then also from earnings alone). I owe less tax if I use earnings only as I have some savings interest to take into account. That's why I'm so interested in when the way you calculate it changed cos I may have been charged wrongly.

jem16

Bea787 wrote: »

The 10% rate aside though Jem I think it does make a difference. My earnings are more than PA + limit, but I worked out the tax I would owe using both approaches - (deducting PA from total income and then also from earnings alone). I owe less tax if I use earnings only as I have some savings interest to take into account. That's why I'm so interested in when the way you calculate it changed cos I may have been charged wrongly.

Perhaps you can show some figures to let me see how you have worked out your examples. I suspect you may be misunderstanding the 10% rate as it is now.

Basically the 10% rate will only apply to someone whose earned income is less than the personal allowance plus the 10% taxable band. So for this year if your earned income is less than £8105 plus £2710 which is £10,815 then some of your savings can utilise the 10% rate. As soon as your earned income is over £10,815 you are no longer able to have 10% applied to any of your savings.

Bea787

Thanks Jem. Of course you are right. I made the mistake in my comparison of forgetting to add the interest and tax on that when i did the calc with the two income types separated out. As you rightly say, no difference which ever way you do it. Thank you so much. :T