Tx notes fa22 Final

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Answer to Example 2
 
 
Billy Income Tax Computation 2022/23
Tax calculation: 
Billy is a basic rate taxpayer, so his savings income nil rate band is £1,000. The 0% starting rate for 
savings income is not applicable as non savings taxable income (£14,930) exceeds £5,000
Answer to Example 3
 
Billy Income Tax Computation 2022/23
Tax calculation:
Billy is a higher rate taxpayer and therefore has a savings income nil rate band of £500. The savings 
income nil rate band of £500 counts towards the basic rate threshold of £37,700
Non-savings 
income
Savings 
income
Total
£
£
£
Trading income
27,500
27,500
Bank Deposit interest 
10,000
10,000
Total Income
27,500
10,000
37,500
Less: Personal Allowance
(12,570)
(12,570)
Taxable Income
14,930
10,000
24,930
Non Savings
14,930 @ 20% 
2,986
Savings
1,000 @ 0%
0
9,000 @ 20% 
1,800
Tax liability
4,786
Non-
savings 
income
Savings 
income
Total
£
£
£
Trading income
27,500
27,500
Bank Deposit interest
25,000
25,000
Total Income
27,500
25,000
52,500
Less: Personal Allowance
(12,570)
(12,570)
Taxable income
14,930
25,000
39,930
Non Savings
14,930 @ 20% 
2,986
Savings
500 @ 0% 
0
22,270 @ 20% 
4,454
2,230 @ 40%
892
Tax liability
8,332

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The 0% starting rate for savings income is not applicable as non savings taxable income (£14,930) 
exceeds £5,000
Answer to Example 4 
Molly Income Tax Computation 2022/23
Tax calculation
:
As Molly has no non-savings taxable income, the full £5,000 0% starting rate band is available on 
the taxing of the savings income.
Molly is a basic rate taxpayer and therefore has a savings income nil rate band of £1,000.
Savings
Total
£
£
Bank interest
22,500
22,500
Total Income
22,500
22,500
Less: Personal Allowance
(12,570) (12,570)
Taxable income
9,930
9,930
Savings
5,000 @ 0% 
0
1,000 @ 0% 
0
3,930 @20%
786
Income Tax liability
786

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212
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Answer to Example 5 
Polly Income Tax Computation 2022/23
Tax calculation 
Polly has non-savings taxable income of £930, as a result, has a 0% starting rate band available for 
her savings income of £4,070.
As Polly is a basic rate taxpayer, her savings income nil rate band is £1,000.