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ACCA Strategic Professional · Advanced Taxation (UK) · Tax advantages and disadvantages of alternative courses of action

Priya is a higher rate taxpayer with no other savings income. She receives bank interest of £3,000 and dividends of £2,000. Which statement correctly gives the nil rate bands available to her on these amounts?

A higher rate taxpayer receives a savings nil rate band of £500, not £1,000, and the dividend nil rate band is £500 regardless of rate band. So Priya has £500 of each nil rate band available against her interest and dividends.

  1. ASavings nil rate band £1,000 and dividend nil rate band £500
  2. BSavings nil rate band £500 and dividend nil rate band £500Correct
  3. CSavings nil rate band £500 and dividend nil rate band £2,000
  4. DSavings nil rate band £1,000 and no dividend nil rate band because she is a higher rate taxpayer

Explanation

The savings income nil rate band is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Priya is a higher rate taxpayer, so she gets £500. The dividend nil rate band is £500 for all taxpayers. The £1,000 savings option applies only to basic rate taxpayers.

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