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Hello Sir,
I was wondering in the mock of sep 23 on the practice plat form q2 apv:
How comes to calculate tax relief on the bank they have split it into 4 years as in I understand that they assume that interest will be different every year due to the opening balance
BUT
Why have they not done the same for the subsidised loan as they have used interest as the same x tax of 20% x df. So they haven’t assumed interest will different every year like above?
Also interest saved on a tax on subsidy benefit why have they used 6% and not the difference between normal loan so at 9%and 3.5% subsidy loan= at 5.5%? Where is this 6% from?
Thank youuu
As far as the bank loan is concerned, each year there is an equal repayment and the repayments cover the interest and the principal. This is because the question specifies this to be the case (and is why we divide by the annuity factor to determine the total repayment each year).
However this is not the case for the subsidised loan, and as is usually the case for loans the interest each year is constant and the principal is repaid at the end of the loan term.
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