Hi,
I have a question from the exam September/December 2015; Question 5b.
The question is: Calculate Samson’s income tax saving for the tax year 2014–15 if the building society deposit account had been in Delilah’s sole name instead of in joint names for the entire year.
The answer: Transferring the building society deposit account into Delilah’s sole name would have saved Samson income tax of £2,880 (4,800 x 60%).
Can you explain to me how 60% is calculated?
Thank you for any help you can provide.
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Question 5b; Sep/Dec 2015 exam
As the answer states the income is effectively taxed at a marginal rate of 60% as it is income that falls between 100,000 and 120,000 where the PA is reduced by £1 for every £2 of income within the band.
Thus £2 of income will increase the taxable income of the taxpayer by £3 (£2 of income plus £1 through loss of PA). An increase therefore in taxable income of £3 in the higher rate band increases tax by £1.20 (£3 x 40%). So additional tax of £1.20 on income of £2 is a marginal rate of 60%.
Thank you for all your assistance.
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