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Hi, I have this question in ACCA mock test (Taxation):
“Martin is self-employed, and for the year ended 5 April 2025 his trading profit was £109,400. during the tax year 2024-2025, Martin made a gift aid donation of £800 (gross) to a national charity.
What amount of Personal Allowance will Martin be entitled to for the tax year 2024-2025?My answer was £8,270. Their answer was £6,700.
They don’t explain why and how they calculated this £6,700.
As per my knowledge, the PA is reduced when ANI exceeds the income threshold of £100,000. And PA is reduced by £1 for every £2 above this threshold.
So my calculation is:
PA 12,570
Less ANI:
TP £109,400
Less Gross Gift Aid (£800)
£108,600
Less Threshold (£100,000)
Excess x 50% £8,600 x 50% (£4,300)
Revised PA £8,270What did I do wrong as I can’t find anything in the books that states another calculation or another rule? Please, any help would be greatly appreciated as I am sitting my Taxation exam in 3 weeks.
You haven’t done anything wrong; according to the information that you have provided, his PA would be, as you have calculated, £8,270.
Is there anything else in the question that you may have missed? Property income/savings income/dividends?
For the PA to be £6,700, his ANI would have to be £111,740, which means that his income (before the deduction of the gross gift aid) would have to be £112,540. (£12,570 – 50% x (112,540 – 800 – 100,000) = £6,700.
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