Savings income (which includes all types of interest) paid net is taxed usually at source at 20%. Dividends on UK equities carry a (non repayable) tax credit of 10%. The intention is that only higher rate taxpayers should have to pay any additional tax, although 'starting rate' and non-taxpayers may be entitled to claim a tax refund. The starting rate of 10% applies only to savings income up to £2,880. If non savings income exceeds this, no 10% rate applies.

For higher rate taxpayers, there is the question of how much of their savings income has to bear extra tax. In determining this, the general rule is that savings income is treated as the 'top slice' of income.

This is best illustrated by examples of individuals who have exactly the same savings income in 2014/15, but different other income (for simplicity, treated as being after application of all allowances). The treatment of dividends is more complicated and they are therefore excluded.

Suppose the savings income is received as follows:

                                                                                                                                    Taxable gross
Bank interest                       £1,600 net                  (£400 tax deducted)                           £2,000
Building society interest       £3,200 net                  (£800 tax deducted)                          £4,000

                                                     Mr Black               Mr Smith            Mr Brown             Mr Green
Other taxable income                    £1,000                   £10,000             £31,000              £45,000
Savings income                             £6,000                   £6,000               £6,000                £6,000
Total taxable income                     £7,000                   £16,000              £37,000             £51,000

Mr Black's non-savings income of £1,000 utilises part of the savings income starting rate band. The remaining £1,880 is taxed at 10%, so a refund of tax is due.

Mr Smith's total taxable income is below the higher rate threshold of £31,865 and so he has no additional tax to pay. All his savings income will have been taxed at 20% only. The 10% starting rate does not apply as the non savings income exceeds £2,880.

Mr Brown's total taxable income exceeds the higher rate threshold by £5,135, and so he will have additional tax of £1,027 to pay (£5,135 at 20%).

Because Mr Green's other taxable income already exceeds the higher rate threshold, his savings income will trigger additional tax of £1,200 (£6,000 at 20%). Mr Green's savings income will therefore have been taxed at 40%.

Please contact us if you would like further information on this subject.
RDH Accountant
Q. I run a small shop, which I inherited from my father. The shop has a flat above it which is let out. I've always reported all the income from the shop and flat together as self-employed income on my tax return. Is that correct?
A. No, the income from your shop and the flat should be reported separately on your tax return. The profit or loss from the shop should be reported on the self-employed pages of your return. The net income from the flat should be reported on the UK property income pages on your tax return. Any loss from the shop can't be set off against profits from the letting, or the other way round.

Q. Back in 2010 I borrowed money from my company, and paid the corporation tax charge due. Business has now improved and my company can now pay a dividend to clear the debt I owe to the company. How can I reclaim the corporation tax charged?
A.You need to complete a form L2P to reclaim that tax charge, but that must be done online here: www.gov.uk/government/publications/corporation-tax-reclaim-tax-paid-by-close-companies-on-loans-to-participators-l2p

You need to answer all the questions on the interactive form, then print it off and sign it. The signed form should be sent to:

Corporation Tax Services
PO Box 29997
Glasgow, G70 5AB
RDH Accountants
GrowthAccelerator been extremely successful, 98% of businesses report that they are on track to achieve their key milestones having gone through the process and 96% would recommend it to others. It is a unique service co-invested by Government with the main goal of helping small and medium sized businesses to grow.

GrowthAccelerator is open to small and medium sized businesses registered in England and not restricted to any geographical area. Through GrowthAccelerator the Government aims to add £2.8 billion value to the economy and create 70,000 jobs by March 2015.

Businesses are able to receive a package of support valued at £3,500 for a net cost of £600 if you have 1-4 employees and for a net cost of £1,500 if you have 5-49 employees. Furthermore, once you have qualified for GrowthAccelerator you can also receive matched funding from the Government of up to £2,000 for owners and senior managers to undertake training in leadership and management skills. 

The most popular area of GrowthAccelerator support is their Business Development service which includes creating strategic growth plans, sales and marketing systems etc. 

There are numerous success stories including a health and safety company that has quadrupled its employees and is set to increase its turnover from £150,000 per annum to £650,000 per annum in three years; an architectural and design practice that has grown from 13 to 20 employees in 4 months and a food distribution company which doubled its turnover from £500,000 to £1 million in 2012.

The overriding criteria for eligibility is that a business should have the ambition, capacity and opportunity to double its turnover, profits or employees in 3 years. 

To start the process most businesses contact a registered and approved Growth Coach for GrowthAccelerator who can introduce them to a Growth Manager. This person will advise whether you could be eligible and assist you in drafting your applications.  This normally includes coaching with a registered and approved GrowthAccelerator Coach together with access to workshops and master classes for you and your team normally over a three to nine month period.
RDH Accountants