Tony Heath

I'm interested to know what happens if Profits+Interest are on/near the boundary of the Basic Rate Limit. My questions are as follows: 1. If for example Taxable Profits+Interest come to exactly £37,700 (after Personal Allowance), with Dividend Income stacked on top of that, then does the taxpayer still get the full Personal Savings Allowance of £1,000? 2. The name Personal Savings Allowance suggests it would be deducted from total income, but it's not really is it? It's a Nil Rate Band so it's still counted as an "income" and therefore am I right in thinking that in this scenario the Profit+Interest is still £37,700 and ALL the Dividends would be charged at Higher Rate 40% ? The other possibility is that deducting the £1,000 Personal Savings "Allowance" would leave a £1,000 space in the Basic Rate Band for the first £1,000 of Dividends to be taxed at Basic Rate, but I suspect that's incorrect :o) 3. If for example Taxable Profits+Interest comes to £37,701, i.e. £1 over the Basic Rate Limit, then I'd like to know exactly what happens to the Personal Savings Allowance. Is it instantly slashed to £500 - meaning that suddenly for £1 over the limit you get charged 20% tax on the now disallowed £499 under the Basic Rate Limit and 40% tax on the offending £1? That would represent a penalty of £100.20 for being £1 over the limit! Or do you lose £1 of PSA for every £1 over the Basic Rate Limit which would effectively phase the allowance down to £500 in a fairer manner? Many thanks, Tony.