188体育

Example

In the tax year 2019-20 Jane鈥檚 total income is 拢52,500. She has income of 拢46,000 from employment, savings income in the form of building society interest of 拢1,500 and dividends of 拢5,000. The personal allowance for 2019-20 is 拢12,500 and the threshold after which higher rate tax applies is 拢50,000. The 0% starting rate for savings band is 拢5,000. The personal savings allowance applies to savings income, including interest, up to 拢1,000 for basic rate taxpayers and up to 拢500 for higher rate taxpayers. As Jane鈥檚 total income falls into the higher rate band, she is entitled to a 拢500 personal savings allowance.

Employment income is taxed first followed by savings income and dividend income. The first 拢500 of her savings income is covered by the personal savings allowance. The starting rate for savings does not apply because non-savings income exceeds the personal allowance plus the starting rate for savings band of 拢5,000.

The dividends are taxed as the highest part of income. The first 拢2,000 is covered by the 鈥榙ividend allowance鈥�, more accurately called the dividend nil rate, see SAIM1080 and ITA07/S13A. S13A applies the nil rate to a maximum 拢2000 instead of the dividend ordinary, upper or additional rates according to the circumstances of the case.

Jane鈥檚 tax liability for 2019-20 is therefore as follows:

Income	拢
Employment	46000
Interest	1500
Dividends	5000
Less personal allowance	(12500)
Taxable	40000

Tax	拢
Employment income (46,000 - 8,500 PA* (personal allowance)) @ basic rate 20%	7,500
Interest (1,500 - 1,000 PA*) = 500. This is not taxed after the personal savings allowance of 拢500 is applied	0.00
Dividends (5000 - 3,000 PA*) = 2000. This is not taxed after the application of the of the 拢2,000 dividend allowance	0.00
Tax payable	7,500

*note that the personal allowance has been allocated to Jane鈥檚 different income streams in a way which obtains the most beneficial result for the taxpayer under the beneficial ordering rules at s25(2) ITA 2007.