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HMRC internal manual

Savings and Investment Manual

Savings and investment income: priority of charging rules

Priority of trading and other income over savings and investment income

Income from savings and investments may be taxable under more than one part of the Taxes Acts. ITTOIA05/S366 provides that the following charging provisions take priority over the charge on Savings and Investment income, where income falls both within them and any chapter of Part 4 of ITTOIA05.

  • Chapter 2 of Part 2 of ITTOIA05 (income from a trade, profession or vocation);
  • Chapter 3 of Part 3 of ITTOIA05 (income from a UK property business);
  • Parts 2, 9 or 10 of ITEPA03 (employment, pension and social security income), except for dividends distributions from companies (Chapter 3 of Part 4 – see SAIM5000 onwards) and the charge on loans to close company participators (Chapter 6 of Part 4 – see SAIM5200).

This rule does not apply to gains from life insurance contracts, which are explained in the Insurance Policyholder Taxation Manual.

Priority of one type of savings and investment income over another

Within Part 4, where income falls within more than one chapter, ITTOIA05/S367 sets the following order of priority:

  • the rules on deeply discounted securities (SAIM3000) take priority over the rules on interest (SAIM2000);
  • the rules on dividends (SAIM5000) take priority over any other chapter, except that;
  • building society dividends and industrial and provident society payments are dealt with as interest.

Priority of other income over annual payments

Part 5 of ITTOIA05, under which annual payments are taxable, has the same priority of charging rules. Trading, property and employment income take priority over Part 5 income. In addition, Chapter 2 and Chapter 3 of Part 4 of ITTOIA05 (interest and dividends from UK resident companies) take priority over Part 5.