Starter Savings Rate for higher rate tax

Mr_blibby

Dazed_and_C0nfused said:

Mr_blibby said:

Thanks for the comments and suggestions - unfortunately , the income was in 24/5 tax year so any additional pension contribution (or VCT) now cant be carried back to prior year, only EIS I think and thats going to be too long term and risky for his palate.

However, I still dont understand why this is incorrect 

Gross income £53000

He gets personal allowance of £12570, Plus the starter savings allowance of £5000 (as no tapering due to earned or divi income), Plus the £500 Personal savings allowance (as total income over £50,271)

Gross Income: £53,000

Total Allowances Deducted: £18,070 = £12,570+ £5,000 SRS+ 500 PSA

Net Taxable Income: £34930

 The Basic Rate (20%) applies to taxable income (after allowances), not gross income. up to £37,700 for the 2024/25 year

 £34,930 is obs less than £37700, so why is all that savings income not taxable at 20% at his marginal rate ?

Am I missing something ?

Yes.

In this situation the savings starter rate and savings nil rate (aka PSA) are both sat within the basic rate band so there is only £32,200 left where 20% tax will be applied.

Above that it will be 40%.

OK, Thanks, thats helpful