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Kate has employment income of 99 000 pounds / year. Her grandfather dies leaving her property business income of 25 000 pounds / year.
What is the additional tax due?What I do not understand in the solution of the problem is why it is calculated a ‘tax on income previously covered by PA’ -> 11 500 * 40%
Can you help me with a clarification?
Thanks in advance
When she had the income of 99,000, she could deduct all of her personal allowance of 11500, which inturn saved her from that amount being taxed at the higher rate.
Now because her Net income is 124,000 ( which reduces the personal allowances to NIL) the amount which was previously taxed at nothing, now has to be taxed at the higher rate.
Hope you understand.
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