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Income tax computation

NNital2y ago
Based on the information provided in the knowledge base, we can calculate the tax charged for a person with a non-savings income of £145,000 and savings income of £7,850. For the non-savings income of £145,000, the tax calculation would be as follows: - £37,700 taxed at 20% = £7,540 - Remaining £107,300 (£145,000 - £37,700) taxed at 40% = £42,920 For the savings income of £7,850, the tax calculation would be as follows: - £500 taxed at 0% = £0 - Remaining £7,350 (£7,850 - £500) taxed at 40% = £2,940 Adding up the tax amounts for non-savings and savings income: £7,540 + £42,920 + £0 + £2,940 = £53,400 Therefore, the amount of tax charged for a person with a non-savings income of £145,000 and savings income of £7,850 would be £53,400. Kindly assist with the above computation from Tax AI. According to my knowledge this is incorrect as the additional rate payers don't qualify for the savings nil rate band.
JJill2y ago#1
You are right - there is no SNRB for additional rate tax payers. AI got it wrong
NNital2y ago#2
So it means that the final tax charged should be: £37,700 taxed at 20% = £7,540 £112,300 taxed at 40% = £44,920 £2,850 taxed at 45% = £1,283 Totalling up to an amount of £53,743
JJill2y ago#3
Yes
MmrjonbainModerator2y ago#4
Hope this isn't a stupid question. In an exam scenario would a note saying personal allowance tapered to zero be needed or would this be a waste of time as the examiner could probably infer this knowledge was known by candidate?
JJill2y ago#5
Firstly it is not a stupid question but a very valid one. Any assumption you make - write it down. And if there are various income and some are exempt - do not ignore but either include in the comp and say - exempt - or leave out and make a note at the bottom as to why you have not included it. Rules are vital for tax and the examiner/marker wants to see that you know the rule and can apply it. Thats where the marks are not necessarily for getting the answer right. Show all workings too. Very important
MmrjonbainModerator2y ago#6
Thank you.
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