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TXIncome Tax Liability Question

OOsanne11y ago
Dear Sir, I am doing a question from the BPP revision kit but I am having an issue. Below is the question: Lauren’s father, Tom, a widower, who was born in 1944, has the following income for tax year 2013/14. State retirement pension 4,926 Pension from former employer (before deduction of PAYE) 7,890 Building society interest (net interest credited) 14,320 Tom gave £3,200 to Oxfam (a registered charity) on 21 September 2013 under Gift Aid. This was the actual amount paid. Required Calculate Tom’s income tax liability for tax year 2013/14. Answer: Non-savings Savings Total income income £ £ £ State pension 4,926 Employment pension 7,890 BSI (14,320 × 100/80) 17,900 Net income 12,816 17,900 30,716 Less higher personal allowance (W)(10,192) (10,192) Taxable income 2,624 17,900 20,524 Tax £ On Non-savings income £2,624 @ 20% 525 On Savings income (£2,790 – £2,624) = £166 @ 10% 17 (£17,900 – £166) = £17,734 @ 20% 3,547 Income tax liability 4,089 Working Higher personal allowance £ £ Higher personal allowance born between 6 April 1938 and 5 April 1948 10,500 Net income 30,716 Less Gift Aid £3,200 × 100/80 (4,000) 26,716 Less limit (26,100) 616 ÷2 (308) Revised higher personal allowance 10,192 Regarding the tax calculations can you tell me the reason for multiplying the 10% by 166. I cannot seem to figure out where this figure is coming from. Thanks you.
((deleted)11y ago#1
Savings income starting rate: There is a tax rate of 10% for savings income up to £2,790 (the savings income starting rate limit). This rate is called the savings income starting rate . The savings income starting rate only applies where the savings income falls wholly or partly below the starting rate limit. Remember that income tax is charged first on non-savings income. So, in most cases, an individual’s non-savings income will exceed the savings income starting rate limit and the savings income starting rate will not be available on savings income. BPP Text : Page 28 (7.1.1)
MPMagdalena Pavlova11y ago#2
Dear All, I have a question regarding the same exercise mentioned from Osanne. Is the Gift Aid deducted from the Personal Allowance, because of the higher rate (higher PA of 10 500)? Because, in another exercise, the Basic rate limit was increased by the gross amount of the Gift Aid payment (i.e Gift Aid 1000 => 32010 + (1000*100/80) Thank you in advance.
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