Savings Interest added to my taxable income

dbc43

Hi,
I am a higher rate PAYE  tax  payer and complete a self assessment Tax return.   I earn a  small amount of  interest  and dividends well below the taxable  threshold.  However, on my  tax return the savings  interest and dividends are added to my  standard income  as an employee.  I am then taxed on the whole amount and so have to pay additional tax.  Surely this means i am being taxed on this savings interest.    The 1st £500 of savings is surely   tax free  as of  year  2016-17.

I have not been taxed separately on the savings interest or dividends

Can anyone  help clarify if this is correct.

Thanks
Damian

eskbanker

Savings interest and dividends are both considered as taxable income, but there are nil-rate bands, of £500 (for higher rate taxpayers) and £2,000 respectively, within which the taxation is at 0% (which isn't the same thing as being 'tax-free').

So it's correct for these to be shown as taxable income, but the calculation should show that the tax on them is actually at 0%.  Feel free to post more detailed figures if you're still unconvinced....