Chapter 5: Taxable Income

Question 1

Non-savings income

Answer 1

Any income except interest and dividends

Main sources -
Trading income - Profits from self-employment or from partnership
Employment income
Property income

Question 2

Savings income

Answer 2

Interest income unless exempt such as ISA interest

Question 3

Dividend income

Answer 3

All income received in the tax year from investments in shares, unless the dividends are exempt from income tax - in an ISA

Question 4

Personal allowance

How is it deducted?

Answer 4

12570

1)Non-savings income
2)Savings income
3) Dividend income

A persons taxable income is after the deduction of the personal allowance

Question 5

Income over 100,000 personal allowance restriction

Answer 5

Individuals adjusted net income (after deductions for any gross gift aid donations and gross personal pension contribution)

it is restricted or may even be eliminated

Question 6

Restriction of personal allowance

Answer 6

£2 over £100,000 - take £1 of Personal allowance

1/2 * (adjusted net income - £100,000)

It is a restriction

Do the workings and minus from £12570

Question 7

Net adjusted income and taxable income

Answer 7

Only used personal allowance working

Total income - personal allowance

Question 8

Tax planning

Answer 8

Pay enough gift aid or personal pension contributions to bring the adjusted net income down to £100,000 thereby restoring personal allowance