Interest and Dividend tax allowance

For 2106/17 how will the £5000 nil rate on interest and the £5000 nil rate on dividends work together?
For example, if person A has £8500 earned income, £6500 interest income and £6000 dividend income. Would they pay zero tax (PA £11000, SPA £1000, Dividend and Interest £5000 each at nil rate). Or pay tax of £1000 as their total taxable income exceeds £17000 and so they lose the £5000 interest tax allowance at zero rate?
Parents
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Reply
  • The tax calculation in 2016/17 for income of £21,000, comprising £8,500 earned income, £6,500 savings income and £6,000 dividend income, would be as follows:
    Total
    Non savings
    Savings
    Dividend
    £
    £
    £
    £
    Total income
    21,000
    8,500
    6,500
    6,000
    Personal allowance
    (11,000)
    (8,500)
    (2,500)
    Net income*
    10,000
    4,000
    6,000
    Tax calculation:
    Savings/dividend nil rate allowances**
     
     
    (1,000)
    (5,000)
    3,000
    1,000
    Taxed at 0%
    3,000 x 0%
    Nil
    Taxed at 7.5%
    1,000 x 7.5%
    75
    *The components of net income following the rules in ITA 2007 s16 would be:
    6,000               Dividends
    4,000               Savings Income
    **These do not reduce taxable income
Children