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

  • Thread starter GSV Three Minds in a Can
  • Start date

G

GSV Three Minds in a Can

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 ..
 
A

Andy Pandy

GSV Three Minds in a Can said:
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 ..
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.
 
R

Reestit Mutton

Andy said:
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.
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
 
P

Peter Saxton

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.
What is the logic for earned income being taxed at 20% whereas
unearned income is being taxed at 10% in these circumstances?
 

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