1. avatar says

    please in example 3, why did we not use only the carried forward tax relief option to net off the loss in which case, we would not have lost our personal allowance for the preceding tax year?

    Would appreciate a feedback.

  2. avatar says

    Hello, please I am a bit confused and need a further explanation on the option 3 part. i do not understand why the use of 29,450 pounds to calculate the 20% tax savings instead of 32010 pounds. i think I am missing something.

    • avatar says

      Hi I was confuse too but I use this alternative method hope its correct and you understand as well.
      say no loss was carry forward then david will pay
      60000-9440=50560 taxable profit
      tax will 32010*20%=6402 and 18551*40%=7420
      total tax payable=(6402+7420)=13833 remember this

      if full relief carry forward then david taxable income will be
      tax payable on this 2560*20%=512

      so by carrying forward loss his tax savings are 13833-512=13310.

      what you thinks?

    • avatar says

      You saved 40% tax by using 18,550 pounds worth losses. Your total loss was 48,000 pounds and the balance is only 29,450 pounds. Therefore you can’t eliminate the total tax liability as you don’t have sufficient losses to cover the total income. That’s why 29,450 is used instead of 32,010 pounds.

  3. avatar says

    sir , i have a small doubt. i understood how you got the amount ‘6,352’ in the answer(option 2) of example 3. but could you please explain why this amount comes under repayment? i thought of it for a long time but i just cant find the reason. thanks

    • avatar says

      That is the amount of tax that you would have already paid to HMRC in the tax year 2012/13. Therefore, if you chose to use the loss relief for that year, you would be entitled to a refund of the tax already paid which would have been taxable income of $(42,100-9440)=$31,760@20%=$6,352.

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