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Where Taxpayers and Advisers Meet

How to calculate which income tax band you are in

spiderplant0
Posts:3
Joined:Thu Aug 18, 2016 3:34 pm
How to calculate which income tax band you are in

Postby spiderplant0 » Tue Jul 28, 2020 5:43 pm

In order to figure out my Capital Gains Tax and "Starting Rate for Savings" I first need to figure out what English tax band my income is in. Am I right in thinking that I do this by adding up my employment, savings and dividend income WITHOUT subtracting any allowances? E.g. if my income, prior to subtracting the personal allowance, dividend allowance and personal savings allowance is under £12500, I'm in the zero rate band, if its between £12500 and £50000 I'm starting of in the basic rate band. (2020/2021 tax year.)

(Also, if anyone has a guide explaining how to calculate tax for employment, savings, dividends, and shares CGT, that would be very useful). Thanks.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: How to calculate which income tax band you are in

Postby pawncob » Wed Jul 29, 2020 11:36 am

Try this:https://www.gov.uk/guidance/hmrc-tools-and-calculators

and this:https://www.gov.uk/government/collections/self-assessment-helpsheets-main-self-assessment-tax-return#helpsheets-for-other-taxable-income-and-losses
With a pinch of salt take what I say, but don't exceed your RDA

HinaFelix
Posts:5
Joined:Wed Jul 08, 2020 1:51 pm

Re: How to calculate which income tax band you are in

Postby HinaFelix » Tue Nov 24, 2020 8:20 pm

Hello, enter the official UK Government's site and search calculator and other tools, that would help you!

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: How to calculate which income tax band you are in

Postby robbob » Wed Nov 25, 2020 10:31 am

there will be different calcs for capital gains tax and starting rate for savings.

Ref capital gains tax the perosnal allowance is ignored as you cannot use the perosnal allowance to cover capital gains tax liabilities - practicably speaking though this may not matter too much if your other income does fully use up the personal allowance.
So for capital gains as long as total income subject to tax (ie over annual exemption for capital gains profit ) is under £37,500 you should avoid the higher rate charge. Any other income that is covered by the personal allowance can be ignored here.


Ref savings its complicated as you can choose what income you allocate against personal allowance - basic advise here os best read from this link.

https://www.gov.uk/apply-tax-free-interest-on-savings

It probably doesnt say so on the link though but you can ignore dividend and capital gains income when doing the calcs - you also get the £1k savings allowance too which can be ignored as well.

An exteme example would be
£12,500 salary
£7,000 interest received
£2,000 dividend income
capital gain £11,000 over annual exemption

Looking at the interest received you get £6k without tax being charged(1k +5k) as the dividend income and capital gains is ignored and the first 1k interest is ignored.

so your actual income for working out the tax you pay on interst is only £12,500 salary + £6,000 interest.
The first 5k takes you up to teh £17.5k total and the last £1k is taxed at 20%
Capital gains tax would be at approrpiate rate 10% or 18% (residental property)

Total income for the year £44,500 - potential tax bill of £1,300 - whast not to like about that - add in another £1k of sole trader income and £1k of misc income tax free - marry someone who doesnt use their allowance and it gets better again.

feel free to post income splits if you wnat calc done.


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