ACCA Applied Skills · Taxation (UK) · The scope of income tax
Ahmed has employment income of £15,000 and bank interest (savings income) of £4,000 for the tax year. His personal allowance is £12,570. How much of his savings income is covered by the 0% starting rate for savings?
£2,570 of the savings income is covered by the starting rate. The £5,000 starting rate band is reduced by taxable non-savings income of £2,430 (£15,000 less the £12,570 personal allowance), leaving £2,570 taxed at 0%.
- A£5,000
- B£4,000
- C£2,570Correct
- D£2,430
Explanation
Taxable non-savings income is £15,000 - £12,570 = £2,430. The starting rate band of £5,000 is reduced by this, leaving £2,570 at 0%. The £5,000 option ignores the non-savings income, and £4,000 treats all savings as covered.
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