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Dear Sir I have a question regarding a technical article on the Student Accountant of Oct 2014.
With reference to FA 2013 on the web site of ACCA, example 2 under the TAX SYSTEM.
Ingrid was born on 29 May 1973. For the tax year 2013–14 she has a salary of £37,000, building society interest of £800 (net) and dividends of £9,000 (net).
The Answer to the question is as follows:
Income tax:
28,560 at 20% 5,712
3,450 at 10% 345
6,550 at 32.5% 2,129
______
Tax liability 8,186My Answer is as follows:
32010 at 20% = 6402
4990 at 40% = 1996
1000 at 40% = 400
10000 at 32.5% = 3250less tax at source (200 + 1000)
Answer: 10848
Am I missing anything here?
Thank you for clarifying
Dear the salary is 37000 deduct the personal allowance u will get 27560 then add 1000 of building society interest (gross) u will get 28560 then multiply it by 20%….basic rate band limit is 32010 so u still have 3450 so check the band list if dividend income falls in basic rate band we multiply it by 10%…then the reaming amount of dividend(gross) is 6550 so multiply it by 32.5 %
Thank u very much haymd1, but then should we not remove the tax at source 200 for interest and 1000 for dividend?
You should do it I was telling about those initial workings after that u solve it accordingly 🙂
You need to look at how the basic income tax computation is put together with non-savings (other) income, savings income and dividend income and that deductions (the PA) are then applied in the same order and how the relevant tax rates are applied – as stated by haymd1 and that you will clearly see shown in OT course notes – chapter 2.
You should not be attempting to read technical articles until you have worked through the course notes!
You would also know from the notes that Tax Liability is before the deduction of tax credits and hence why they have not been deducted. They are deducted from tax liability in deriving tax payable.
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