ACCA Advanced Taxation (ATX) Practice Exam

What is the nil rate band for savings income for basic rate taxpayers?

1. £1,000

2. £500

3. £1,500

4. £2,000

The correct answer is: £1,000

The nil rate band for savings income for basic rate taxpayers is indeed £1,000. This amount allows basic rate taxpayers to receive a portion of their savings income tax-free. It is a feature designed to provide relief on savings interest, recognizing the need to alleviate tax burdens on lower earners. Basic rate taxpayers are individuals whose total taxable income falls within a specified limit, typically up to the higher rate threshold. For the tax year in question, the first £1,000 of interest income received from savings accounts is not subject to tax, which benefits those managing modest savings. Understanding this allowance is crucial for effective tax planning, enabling individuals to optimize their savings interests without incurring additional tax liabilities. The other options presented reflect different figures, which do not align with the current tax law applicable to basic rate taxpayers. Thus, the correct amount is clearly established as £1,000, affirming its significance in tax calculations for individuals within this category.