ACCA Advanced Taxation (ATX) Practice Exam

What percentage of the savings nil rate band applies to basic rate taxpayers?

1. 500

2. 1,000

3. 1,500

4. 2,000

The correct answer is: 1,000

In the context of inheritance tax, the savings nil-rate band allows individuals to benefit from an increased threshold when it comes to savings and investments. This additional relief is specifically designed for basic rate taxpayers. The correct amount of the savings nil-rate band that applies to basic rate taxpayers is £1,000. This means that if a basic rate taxpayer's income includes savings income, they can earn up to this limit without having to pay tax on it. This relief is particularly beneficial as it helps to ensure that individuals who are not in higher income brackets—that is, those who typically pay a lower tax rate—are still afforded some level of tax relief on their savings. Understanding this relief helps in planning for inheritances and savings, as it can influence decisions on investments and how much income is subjected to tax.