Chapter 2 - Income Tax Computation

Question 1

How do you calculate Adjusted Net Income?

Answer 1

ANI = Net Income - Gross personal pension contributions - gross gift aid donations

Question 2

How are interest payments made during a tax year on loans taken out, for certain purposes, by a tax payer treated?

Answer 2

These are deducted from their total income, in the NSI column.
These purposes include:
- to buy plant/machinery for a partnership OR employment purposes
- to buy an interest in a close company/employee-controlled company
- to invest in or lend to a partnership
- to buy shares in or lend to a co-operative (if you are an employee)
- to pay inheritance tax

Question 3

How is income split regarding jointly owner property?

Answer 3

Shared equally. Must be an election to be based on actual % ownership.

Question 4

How does Marriage Allowance work?

Answer 4

Can transfer up to £1,250 of their personal allowance to their spouse.
Relief is given by reducing tax liability of recipient at basic rate.
Must meet both criteria:
1) Transferor spouse has no tax liability or is BRTP.
2) Recipient is a BRTP.

Question 5

What is the child benefit tax charge?

Answer 5

Child benefit rate:
- £1,095 pa for first child
- £725 pa for each other child
Charge applies if ANI > £50,000 for recipient of child benefit.
Charge = 1% of child benefit amount for each £100 of income between £50,000-60,000.
If >£60,000, 100% of benefit is charged.
Tax charge added in arriving at income tax liability.