10% income tax band kept for investment income .. how?

Discussion in 'UK Finance' started by GSV Three Minds in a Can, Mar 22, 2007.

  1. Has anyone figured out how/what this budget item actually implies or how
    it might work? In particular, does this mean everyone is going to be
    turning in a tax form each year to demonstrate they earned £x savings
    income, paid 20% tax on it, and want half of it (up to the 10% band
    limit) back??

    Sounds horrendous to me .. so much for simplification ..
     
    GSV Three Minds in a Can, Mar 22, 2007
    #1
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  2. GSV Three Minds in a Can

    Andy Pandy Guest

    No, I assume saving income will be assessed at the top of your income like it is
    now - so if your earned income takes you into the basic rate band you'll still have
    to pay 20% tax on savings. Only people whose other income doesn't take them into the
    basic rate band will be able to pay 10% tax on saving income.

    That's how it works now - people who are in the HRT band pay 40% tax on their
    savings. If savings were assessed before earned income, they would pay 20% tax on
    savings and pay only 18% extra on the earned income they push into the HRT band.
     
    Andy Pandy, Mar 22, 2007
    #2
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  3. The above statement in isolation can be misinterpreted.

    Maybe it would have been better to say "people who are in the HRT band
    pay 40% tax on any savings interest above the HRT threshold" as, for
    some people, it's their savings interest that pushes them into the HRT band.

    Reestit Mutton
     
    Reestit Mutton, Mar 22, 2007
    #3
  4. GSV Three Minds in a Can

    Peter Saxton Guest

    What is the logic for earned income being taxed at 20% whereas
    unearned income is being taxed at 10% in these circumstances?
     
    Peter Saxton, Mar 24, 2007
    #4
  5. GSV Three Minds in a Can

    Andy Pandy Guest

    "To continue to reward saving". That's all it says in the document explaining the
    reasoning behind the personal taxation changes (5.5):
    http://www.hm-treasury.gov.uk/media/73B/6B/bud07_chapter5_320.pdf

    I suspect the real reason is political, so they can't be accused of "increasing the
    tax on savings".
     
    Andy Pandy, Mar 24, 2007
    #5
  6. That doesn't ring true. After all, they *can* be (and have been) accused
    of "increasing the tax on earnings".
     
    Ronald Raygun, Mar 24, 2007
    #6
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