INCOME TAX BAND EXTENDING

Thomas earned £160,000 trading profit in 2023/24 In the tax year he paid £6,400 to charity under the gift aid scheme. Calculate Thomas’s income tax liability for 2023/24. HI I FOUND THIS QUESTION IN THE NOTES OF TX FROM OPENTUTION WHAT I DONT UNDERSTAND IS THE ANSWER GIVEN IN THE NOTES Answer to Example 12 Thomas Income Tax Computation 2023/24 Income Tax Calculation Even though it is obvious that PA is not available - NEVER ignore it - always explain either with a calculation or a sentence: The PA is reduced to nil as the adjusted net income exceeds £125,140. (W2) Gross gift aid extends both rate bands: BRB: 37,700 + (6,400 × 100/80) = 45,700 HRB: 125,140 + (6,400 × 100/80) = 133,140 (W3) 133,140 – 45,700 = 87,440 Easy marks in this exam for showing the rules, applying the rules and showing ALL calculations. Non savings Total £ £ Trading income 160,000 160,000 Total Income 160,000 160,000 Less: PA (W1) (–) (–) Taxable income 160,000 160,000 Non Savings (W2) 45,700 @ 20% = 9,140 (W3) 112,300 @ 40% = 44,920 2,000 @ 45% = 900 160,000 Income Tax Liability 54,960 (W1) Net Income 160,000 Less Gross gift aid payment (6,400 × 100/80) (8,000) Adjusted Net income HERE I DONT UNDERSTAND THE WORKING 3 WHY DID WE USE ADDITIONAL RATE BAND ON 2000 WHEN WE HAD CAPACITY IN HIGH RATE BAND??