I've drafted a tax return using HMR&C's online system. Earnings of £60K, pension net £13,600, gross equivalent £17K, bank interest £1400. The HMR&C calculation gives the basic rate savings allowance of £1,000 then taxes the balance at 40%.
This seems to be using the Scottish tax rate bands as follows:
£60K minus £17K for pension and £11,850 for 2018/19 personal allowance leaves £31,150 taxable earned income. This leaves £430 bank interest in the Scottish basic rate band up to £31,580, the remaining £570 of the £1,000 savings allowance is taxable at 0% and the balance of bank interest is taxable at the UK tax rate of 40%.
BUT isn't bank interest supposed to be non-devolved for tax purposes? In other words isn't Scottish bank interest supposed to be taxed using UK tax bands as well as tax rates? In the above scenario, all of the bank interest would fall within the UK basic rate band up to £34,500 and no higher rate tax would be payable. I'm confused!
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