Calculation of Income Tax

Question 1

What is the limit for the starting rate band?

Answer 1

£5,000 - but only applies to savings income.

Question 2

What is the limit for the basic rate band? What tax rates?

Answer 2

£0 - £32,000. Non-savings and savings are taxed at 20%. Dividends are taxed at 7%.

Question 3

What is the limit for the higher rate band? What tax rates?

Answer 3

£32,001 - £150,000. Non-savings and savings are taxed at 40%. Dividends are taxed at 32.5%.

Question 4

What is the limit for the additional rate band?What tax rates?

Answer 4

£150,000+. Non-savings and savings taxed at 45%. Dividends are taxed at 38.1%.

Question 5

What allowances are available to taxpayers and how much are they?

Answer 5

• Personal Allowance - Reduced as income increases over £100,000.
• Savings Allowance - £1,000 for basic rate taxpayers, £500 for higher rate and £0 for additional rate taxpayers.
• Dividend Allowance - £5,000. Available to ALL taxpayers regardless of income level.

Question 6

How would we extend the basic rate band when Gift Aid or personal contributions are made?

Answer 6

First, gross up the payment by multiplying by 100/80. Then add this figure on to the band. This new figure is the new basic rate band.

Question 7

What date is payment of capital gains tax due?

Answer 7

31st January following the end of the tax year.