Surrey International Institute
Dongbei University of Finance and Economics
MAN3102 – Advanced Taxation
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Lecture-1; Week-11
Academic year 2022 – 2023; First semester
November 1, 2022 1 / 10
Categories of Income
A Non-savings Income �rst ‘slice’ of taxable income
1 employment income
2 property income
3 trading income
B Savings Income second ‘slice’ of taxable income
1 interest
(e.g. interest on government securities, loan interest,
Bank and Building societies interest)
C Dividends �nal ‘slice’ of taxable income
Note 1: Each category has its own rules for calculating Tax Due
in a tax year
Note 2: The relevant tax rates and tax bands are shown
in a separate schedule.
November 1, 2022 2 / 10
Income Taxed at Source
‘Income Taxed at Source’:
the basic Income Tax (20%) is deducted
before the taxpayer receives the Income
Main types:
1 debenture and other loan interest1 paid by UK companies
2 interest on UK government “gilt-edged” securities, a.k.a ‘Gilts’
3 patent royalties
for example, George received ¿80 interest on Gilt securities
Interest (Net) 80 4
Tax deducted at source 20 1
Interest (Gross) 100 5
Interest is included in George’s Tax Computation at Gross (¿ 100)
George’s Tax Liability is reduced by the Tax Deducted at Source (¿ 20)
1Bank and building society interest is paid gross
November 1, 2022 3 / 10
Income Tax on Savings Income
savings income is taxed at the “starting rate” of 0%
if it falls within the �rst ¿5,000 of taxable income
savings income is taxed at the “savings nil rate”
if it falls within the taxpayer’s
“personal savings allowance”(more about PSA in a while)
The tax bands are allocated �rst to non-savings income and then
to savings income.
Any income tax deducted at source is subtracted from the
income tax liability.
November 1, 2022 4 / 10
Personal Savings Allowance (PSA)
If Taxable Income < 37,700 (Basic band limit) ⇒ PSA = 1,000 If Taxable Income > 37,700 (Basic band limit) ⇒ PSA = 500
If Taxable Income > 150,000 (Higher band limit) ⇒ PSA = Nil
Savings income within the PSA is taxed at the ‘Savings Nil rate’
regardless of the Tax Band in which Income falls
The PSA is not used against savings income within the �rst
¿5,000 of taxable income, as this amount bene�ts from
the ‘starting rate’ of 0%
November 1, 2022 5 / 10
Dividend Income
Dividend Income is the top slice or layer of the
Taxable Income (N.B the tax bands)
For tax year 2022-2023 the tax rates are:
1 dividend nil rate (0%)
if dividend < 2,000
regardless of the Tax Band in which the dividend falls
2 Ordinary rate 8.75%
3 Upper rate 33.75%
4 Additional rate 39.35%
Unlike PSA, the dividend allowance is not reduced for taxpayers
with taxable income exceeding the basic rate limit nor
the higher rate limit
November 1, 2022 6 / 10
Exempt Income
Types of Income exempt from Income Tax:
income from Individual Savings Accounts (ISAs)
income from National Savings Certi�cates
certain minor bene�ts provided to employees
certain lump sums from pension schemes
"rent-a-room" income
Premium Bond prizes and betting winnings
some social security bene�ts
Trading income of up to ¿1,000 per annum
Property income of up to ¿1,000 per annum
November 1, 2022 7 / 10
Personal Allowances, Tax Year 2022-2023
If 'net adjusted Income' < 100,000 ⇒ PA = 12,570
If 'net adjusted Income' > 100,000 ⇒ PA is reduced
by 50% of the excess amount
for example: Net adjusted Income = 110,000 ⇒
PA = 12,570 – 50% x (110,000 – 100,000) = 7,570
PA is deducted in calculating Taxable Income
If PA is not used in full, the unused part is lost (exceptions exist)
Net Adjusted Income=
Total Income
1 tax reliefs
2 grossed-up amount of any Gift Aid donations
(more about it next week)
3 personal pension contributions made during the year.
November 1, 2022 8 / 10
Time for some examples:
Chapter 2: Example 4
Chapter 2: Example 5
Chapter 2: Example 8
November 1, 2022 9 / 10
Thank you very much for attending this lecture
It is time for questions, comments, and suggestions.
(www.menti.com, code: 2307 2053 )
November 1, 2022 10 / 10
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