Tx notes fa22 Final

June 2023 to March 2024 exams
Watch free ACCA TX lectures
3. Income from investments - savings and dividends
Savings income
is interest income which is received gross without any deduction of tax at source 
by the payer and will include interest from banks, building societies (financial institutions that lend 
money for the purchase of property), government securities and corporate bonds, but watch out for 
the exempt sources of interest noted in 1.1 above.
Savings income is assessed in the tax year that it is 
received
.
Dividend income
is received from shares held in a Limited Company and will be received gross 
without any deduction of tax.
Dividend income is assessed in the tax year that it is 
received.
3.1. Calculation of tax
(a)
Taxable interest received from banks and building societies is included in the saving income 
column of the computation.
(b)
Any deductions in the income tax computation (personal allowance and reliefs) are deducted 
first from non-savings income, then savings income, then dividend income, hence the order in 
which the analysis columns are listed.
(c)
Non-savings income is treated as the first slice of taxable income to be taxed followed by 
savings income then dividend income. The total of this tax is the Tax Liability of the taxpayer.
(d)
Tax su
ff
ered at source (PAYE) is deducted from the tax liability in order to arrive at tax payable.
(e)
The di
ff
erent types of taxable income are taxed as follows and in this order:
Non Savings 
Savings 
Savings income benefits from a 0% rate. However, the starting rate only applies where savings 
income falls within the first £5,000 of taxable income. If non-savings income exceeds £5,000, 
then the starting rate of 0% for savings does not apply.
Savings income in excess of the savings income nil rate band is taxed at the basic rate of 20% 
if it falls below the basic rate threshold of £37,700, at the higher rate of 40% if it falls between 
the basic rate threshold of £37,700 and the higher rate threshold of £150,000, and at the 
additional rate of 45% if it exceeds the higher rate threshold of £150,000.
For basic rate taxpayers, the savings income nil rate band for the tax year 2022-23 is £1,000, 
and for higher rate taxpayers it is £500. Additional rate taxpayers do not benefit from any 
savings income nil rate band. 
Dividends 
The first £2,000 of dividend income for the tax year 2022-23 benefits from a 0% rate. 
This£2,000 nil rate band is available to all taxpayers, regardless of whether they pay tax at the 
basic, higher or additional rate. However, the dividend nil rate band counts towards the basic 
rate and higher rate bands.
£1 to £37,700
20%
basic rate
£37,701 – 150,000
40%
higher rate
£150,001 +
45%
additional rate

---

23
Only on 
OpenTuition
you can find: Free ACCA notes 
•
Free ACCA lectures 
•
Free ACCA tests 
•
Free ACCA tutor support 
•
The largest ACCA community