Please bear with me on this query. For 2016/17 the savings allowance is £1,000 for standard rate taxpayers and £500 for higher rate taxpayers. Higher rate for this purpose seems to be where total (taxable) income is £43,001 or above even though none of the income may be taxed at 40% due to say the dividend allowance. This means that someone with a total income of £43,001 will pay £100.20 more than someone earning £43,000 (a marginal tax rate on the £1 of 10,000%).
Although I've doctored the figures slightly from a client's tax return, in essence the figures are actual. Is my software correct or is there something I've overlooked?
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Correct to the best of my understanding. As you say the person may not pay any 40% tax due to the dividend allowance or the savings allowance itself. So the use of the word allowance in both cases is quite misleading.
It's a similar prospect for the transfer of tax allowance between spouses.
Just £1 over the basic rate band and you could have an extra £230 tax to pay.
I'm afraid that you've got it right. FA2016 emphasised the point that when working out the status vis-a-vis higher rate, the DA should be treated as though it didn't exist.
As for the PSA itself, HMRC did once accept the following implementation - that the PSA should be regarded as an up-to-£200 rebate of savings income tax available to basic or higher rate tax-payers. That would have met the legislative intent, and would have eliminated entirely the discontinuity that produces that crazy incremental rate of up to 10,020% - and been a lot easier to understand. A fortnight later they switched to the current, foolish, implementation.
The simple answer is, in your extreme example, to make a donation to charity of £1 under gift aid and carry it back to 2016/17.