A client has a total salary of £65,000 and pays interest of £100 on a loan to buy a share in a partnership. The client receives a gross dividend of 3k and gross interest of £1,000 on their savings. The personal allowance is 12,570 and the higher rate threshold for taxable income is £37,000.
Which of the following describes his liability?
- The client is a HRT and their basic rate band has been fully used up by their taxable salary. They will pay tax on the interest received and dividend at the higher/upper rates.
- The client is a HRT with a taxable income of £56,330 and their basic rate band has been fully used up by their taxable salary. They will pay tax on the interest received and dividend at the higher/upper rates, but the first £500 of the interest will be taxed at 0% and the first 2k of the dividend will be taxed at 0%.
- The client is a HRT with a taxable income of £56,330 and their basic rate band has been fully used up by their taxable salary. They will pay tax on the dividend at the higher/upper rates, but the interest received will be taxed at 0% as it falls within the PSA and the first 2k of dividend will be taxed at 0%.
- The client is a HRT with a taxable income of £56,430 and their basic rate band has been fully used up by taxable salary. They will pay tax on the interest and dividend at the higher/upper rates, but the first £500 of interest will be taxed at 0% and the first 2k of the dividend will be taxed at 0%.
- The client will not be liable on to tax on the interest as it does not exceed 5,000. They will pay tax at a rate of 7.5% on 1,000 of the dividend as it does not exceed 37,700 but the first 2,000 of the dividend will be taxed at 0%.