Is Martin Wrong about Savings Allowance Tax?

friolento

kkento said:

friolento said:

You are correct, @jimjames (apart from the terminology around the PSA). Savings interest is taxed separately from other income, with £500 being taxed at 0%, and the rest at 40% for an HR tax payer.

This is an extract from my last year's HMRC calculation:

But if your income without interest is below the Higher Rate Band would the tax produce a different calculation, I assume this was because your income already put you into higher rates whereas the discussion is about the critical amount of interest taking you just into higher rates.   Incomes typically between £35k and £50k

Regardless of how anyone became a HR tax payer, the first £500 of interest are taxed at 0% for them, and not at 40% as he claimed before correcting himself.

masonic

friolento said:

kkento said:

friolento said:

You are correct, @jimjames (apart from the terminology around the PSA). Savings interest is taxed separately from other income, with £500 being taxed at 0%, and the rest at 40% for an HR tax payer.

This is an extract from my last year's HMRC calculation:

But if your income without interest is below the Higher Rate Band would the tax produce a different calculation, I assume this was because your income already put you into higher rates whereas the discussion is about the critical amount of interest taking you just into higher rates.   Incomes typically between £35k and £50k

Regardless of how anyone became a HR tax payer, the first £500 of interest are taxed at 0% for them, and not at 40% as he claimed before correcting himself.

It seems like he accounted for the £500 PSA, but failed to account for the £470 remaining in the basic rate band that should be taxed at 20%, not 40%.