Has anyone figured out how/what this budget item actually implies or how it might work? In particular, does this mean everyone is going to be turning in a tax form each year to demonstrate they earned £x savings income, paid 20% tax on it, and want half of it (up to the 10% band limit) back??
Sounds horrendous to me .. so much for simplification ..
No, I assume saving income will be assessed at the top of your income like it is now - so if your earned income takes you into the basic rate band you'll still have to pay 20% tax on savings. Only people whose other income doesn't take them into the basic rate band will be able to pay 10% tax on saving income.
That's how it works now - people who are in the HRT band pay 40% tax on their savings. If savings were assessed before earned income, they would pay 20% tax on savings and pay only 18% extra on the earned income they push into the HRT band.
The above statement in isolation can be misinterpreted.
Maybe it would have been better to say "people who are in the HRT band pay 40% tax on any savings interest above the HRT threshold" as, for some people, it's their savings interest that pushes them into the HRT band.
Reestit Mutton
What is the logic for earned income being taxed at 20% whereas unearned income is being taxed at 10% in these circumstances?
"To continue to reward saving". That's all it says in the document explaining the reasoning behind the personal taxation changes (5.5):
That doesn't ring true. After all, they *can* be (and have been) accused of "increasing the tax on earnings".
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