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Where Taxpayers and Advisers Meet

Income tax with foreign income

rowlynca
Posts: 2
Joined: Mon Jan 07, 2019 5:31 pm

Income tax with foreign income

Postby rowlynca » Mon Jan 07, 2019 5:44 pm

I have a salary taxed at source but also declared interest earnings from NZ. This interest earned was largely offset by investing in a SIPP here. However, the tax office first calculated my income (taxable) with a basic rate applied to £33,500 and higher rate to 610 (as applied to my salary). However, they then added the amount I had paid into a SIPP, (offsetting foreign interest income), onto the basic tax rate increasing the 20% tax band to £39,313.
By doing this they have 'reduced the amount of income charged to higher rates of tax' but at the same time this reduces the amount of tax relief I am entitled to?
Surely the tax band of 11,501 to £33,500 should remain?
Can anyone help me with this please or is there some case law? The person at the tax department appears to use a form but cannot explain to me how or why they are coming up with this extended basic rate tax band?

bd6759
Posts: 3010
Joined: Sat Feb 01, 2014 3:26 pm

Re: Income tax with foreign income

Postby bd6759 » Mon Jan 07, 2019 8:57 pm

The investment into your SIPP is net of basic rate tax. You get relief at higher rate by extending the lower rate band which in turn reduces the amount you pay at higher rate. This is how you get the correct relief. It is simple arithmetic.

rowlynca
Posts: 2
Joined: Mon Jan 07, 2019 5:31 pm

Re: Income tax with foreign income

Postby rowlynca » Mon Jan 07, 2019 9:10 pm

Thank you for your response. I had declared the gross amount i.e. my contributions plus the tax contribution of 20% made directly into the SIPP. I guess I need to approach the tax department regarding this being an error?
Thanks you for your explanation.

bd6759
Posts: 3010
Joined: Sat Feb 01, 2014 3:26 pm

Re: Income tax with foreign income

Postby bd6759 » Mon Jan 07, 2019 10:41 pm

You declared the correct amount.


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