Chapter 2 – Income tax computation
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hi,
are those lectures ok for June 2024
Hi, I would appreciate it if you shared the link to the practice exam for TX.
May I know how shall i get $12,570 in Lecture 1 Example 1?
Please how do we arrive at 22,270 @ 20% for Example 3 when calculating the Tax liability
Non Savings Income – 14930 + Savings Nil band rate 500 (because income exceeds 37,700) = 15430. Balance available in Basic rate is slab is 22,270 (37,700 – 15,430)
In the solution for practice question 1, why was the remainder of the Dividend thus: 5000.00 divided into Basic rate and higher rate instead of just using the high rate of 33.75%
Is there an error I’m example #2? The non savings taxable income of £14,930 exceeded £5000 therefore the savings nil rate band should not be applicable. I’m confused.
Exactly the question I had as well.
I am not in a position to watch the lecture at the moment. However, it is TAXABLE non savings income that can’t be over £5000. If it is over this limit then the savings stater rate is wiped out. See following link for details-
https://www.gov.uk/apply-tax-free-interest-on-savings
The £1,000 deducted is based on this rule (2):
For basic rate taxpayers, the savings income nil rate band for the tax year 2022-23 is £1,000,
and for higher rate taxpayers it is £500. Additional rate taxpayers do not benefit from any
savings income nil rate band.
The one you got confused with is this rule (1):
Savings income benefits from a 0% rate. However, the starting rate only applies where savings
income falls within the first £5,000 of taxable income. If non-savings income exceeds £5,000,
then the starting rate of 0% for savings does not apply.
Savings income in excess of the savings income nil rate
If you look at Example 4, might have a better understand, if rule (2) applies, the taxpayer would get a £5,000 deduction.
J8542, I have not watched the video. I suspect you are right in the main. However, you are wrong when you say if non-savings income is greater than £5000 that the savings starter rate does not apply. I will quote directly from government site from link I gave above-
“If your other income is less than £17,570
Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.
Example
You earn £16,000 of wages and get £200 interest on your savings.
Your Personal Allowance is £12,570. It’s used up by the first £12,570 of your wages.
The remaining £3,430 of your wages (£16,000 minus £12,570) reduces your starting rate for savings by £3,430.
Your remaining starting rate for savings is £1,570 (£5,000 minus £3,430). This means you will not have to pay tax on your £200 savings interest.” If TAXABLE non-savings income is greater than £5000 the savings starter rate will be unavailable.
mrjonbain, I copied the text straight from the manual. And I believe we are both correct.
“the starting rate only applies where savings income falls within the first £5,000 of taxable income”
In order to have a taxable income of £5,000:
£12,570 (personal allowance) + £5,000 which is £17,570.
To be more accurate, the text that I quoted could be “If taxable non-savings income exceeds £5,000, then the starting rate of 0% for savings does not apply.”
Thanks for your input, I have a better understanding now 🙂
Hi there ,the working of example 6 part 2 ( the example that has Daisy), if possible, i would like to know how the 230GBP and 12,270 came to be?
thank you in advance
In example 13, how will Elliot benefit? If the tax band hadn’t been extended to 39700, she would be paying 7540 but with increased band she will be paying 7940. That’s a 400 pound increase in tax liability.
In example number:
14
Adjusted net income exceeds 125,140 and
15
Adjusted net income exceeds 100,000
Why there is a difference it should be the same as the example number 14/ £ 125,140.
hello
in example 16 (Elton and david) david’s tax liability becomes nil when he uses his personal allowance (10000-12570=nil), so why doesn’t elton also use his personal allowance to be rid of his liability i.e. his 10000-12570…?
The election is only available when both taxpayers are either
just basic rate taxpayers or non-taxpayers. The election is only likely to be made when one spouse is
a non-taxpayer and has an amount of unused PA that would otherwise be wasted and the other
spouse is only a basic rate taxpayer.
Given that Elton is a higher Tax Payer, this election isn’t possible
What is the admin chapter the tutor keeps referring to ? I studied the first chapter and I didn’t see any p60 or p11d.
Tax will provide you with a good foundation – but you fill find the ATX syllabus has a lot more content. I would suggest investing in some learning content as well as revision kit.
Hello – Is there any reason why I cant see the lectures? I’m just starting on lectures chapter 2
No idea, try another browser or device, video works fine
Yes it’s blur when opened on laptop however on Mobile it’s clear
Hi,
In practise question 1 – Kate.
how did we get the £2,270 x 8.75% for dividends?
8.75% rate is applicable up to the BRB limit of £40,200 (refer to W1). Look at the “Income Tax” computation section in the answer and add up all income above and including £2,270, you will get £40,200 in total. The remaining part of the dividend income is taxed at the higher rate.
Thanks, was wondering how to get that amount.
In Example 12, after applying basic tax rate of 20% on 37700, we didn’t apply nil rate band (500 @ 0%) as Kathy is a high rate tax payer
Sorry i got that. No savings income
Question 3 of the practice questions – my income tax liability came to 56,638?
I got this too. Must be a typo or something since 56,638 is indeed the sum of everything on Practice Answers.
Hi Mam,
I am planning to sit for ATX-UK next. Since the lectures of ATX are not available, I am planning to watch lectures for TX-UK and then solve revision kit for ATX-UK. Just needed your guidance if I am on the right path.
Thanks for the lectures.
Tax will provide you with a good foundation – but you fill find the ATX syllabus has a lot more content. I would suggest investing in some learning content as well as revision kit.