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Hi Sir
First, thanks again for all your work.
I did read the new technical article we received ” Higher Skills” and I don’t understand their answer for Example 1- Mixed remuneration package where Newt pay himself salary 8000+Net dividends 45000+Pension 10000
Here is the link:
https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f6/technical-articles/higher-skills.html1-when the text says “…make a pension contribution…” is in general the amount gross or net?
2-why Tax suffered at source= 47400*10% ? I would have put only 5000 from the dividend
3-why they didn’t extend the basic rate by Gross pension amount so 31785+10000 (gross amount) ?Thanks for your help, I’m completely lost on that one
Nlikha
Read OT course notes chapter 10 page 69 to get a better understanding of pension scheme contributions.
You must firstly distinguish between occupational pension schemes and personal pension scheme contributions and then between contributions made by the employer and those made by the individual. This is a contribution made by the company (employer) into an occupational pension scheme. It is therefore an exempt benefit and a gross contribution.
The basic rate band is only extended when a contribution is made by the individual into a personal pension scheme – it is also only personal pension scheme contributions made by the individual that are made net of basic rate relief given at source.
In respect of the dividend tax credit it is restricted to the taxable part of the dividend ie 47,400 – this will only happen where the PA exceeds both the non savings and savings income
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