question about savings, isas, PSA, etc...

bowlhead99

tropic_of_Username003 said:

Because in this situation, your personal allowance would no longer be used to take £12,500 of salary out of tax, but instead to take £12,499 of salary and £1 of dividends out of tax. Then you would pay 20% tax on the remaining £35,501 of salary, 0% on the £500 interest, and 0% on the remaining £2,000 of dividends.

So you only pay 20p extra income tax, not 32.5p.

The principle is that your personal allowance is allocated against whatever kind of income it's most beneficial to the taxpayer to allocate it.

Unfortunately, this adds a whole extra layer of complexity to income tax.

Yes agreed, apologies for any confusion caused.