When is tax deducted in each tax year?

Is savings income tax always deducted @ rate 20 % in 2007/2008 tax year ?

• in practice, why is any interest received on the bank savings always deducted at 20 % band rate regadless the amount of money from which the interest is derived for the purpose of calculation of income tax liablity? in tax year of 2007/2008 the tax bands for income tax on savings consist of : basic rate :from 1 pound to 2230 pounds is taxable at 10 % rate starting rate : from 2231 pounds to 34600 pounds is taxable at 20 % higher rate : 34601 pounds to above is taxable at 40 % rate in practice (at least what my lecturer told me during the tax law lecture.earlier today,which I cant get my head around..till now), they above rate bands has been of no use. I jusr want to convince myself about what my lecturer has told me that all savings income in the form of interest will always be deducted at 20 % rate only, and when i kept chasing him by asking further question why does the above tax band does not apply in practice..he went to me..that's what it says in the textbook...

• Answer:

  One step down is correct. The basic rate of tax is 22% but there is a special savings rate of 20%. I think this was introduced to encourage savings. If you are liable to tax at 22% you don't pay the extra 2% tax on savings income at the end of the year. However, if you are liable at 40%, then you pay the additional 20% at the year end. Gooner may speak sense to you, but he is technically incorrect! The basic rate of tax is 22% not 20%