Blossom earned £132,500 in the tax year. She made a cash contribution to a personal pension scheme of £20,000.
What are Blossom's basic rate band and higher rate band limits?
A. BRB: £62,700 and HRB £150,140
A. BRB: £57,700 and HRB £150,140
A. BRB: £62,700 and HRB £145,140
A. BRB: £57,700 and HRB £145,140
The correct answer is A.
However, her ANI is £107,500 and so her taxable income is £98,680 therefore, she should be a higher-rate taxpayer and that only the BRB should be extended.
Can you please explain why the HRB is also extended?
Thank you.
Ask the Tutor ACCA TX-UK
BPP Workbook - Chapter 5 - Activity 1
Sorry, I have made a mistake with taxable income. It should be £123,680 (£132,500-£8,820) and she's still a higher-rate taxpayer.
when a contribution is made to a pension scheme both rate bands are extended.
So for pension scheme, both rate bands are extended for higher-rate taxpayers whereas gift aid donation, the BRB is extended for higher-rate taxpayers and BRB and HRB for additional taxpayers?
But as she is a higher-rate taxpayer, her taxable income is below the HRB and increasing the HRB has little use, doesn't it?
Please help me clarifying this.
The question is clearly asking you to extend bth BR and HR bands. If in doubt do both but be lead by the question - i tell my students to do both
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