Income Tax Flashcards
Income liable to income tax
- Money from employment
- Any benefits from employment
- Profits from self-employment
- Most Pensions
- Rental income
- Income from trusts
- Interest
- Dividends in excess of allowance
Income NOT liable to income tax
- Income from ISAs/JISAs
- rent a room relief (£7500)
- Interest (Personal Savings Allowance) - BRT £1000, HRT £500 ART £0
- Dividend - First £2000 (Dividend Allowance)
- Premium Bonds
- National Lottery wins
Dividend Rates 2022/2023
Basic: 8.75%
Higher: 33.75%
Additional: 39.35%
Calculate total income tax liability if I earn £30,000 per annum
£30,000 - £12,570 = £17,430 (Taxable Income) x 20% = £3,486 tax liability
Calculate total income tax liability if I earn £33,000 per annum
£33,000 - £12,570 = £20,430 (Taxable Income) x 20% = £4,086 tax liability
Calculate total income tax liability if I receive £18,570 in interest (no other income).
£18,570 less Personal Allowance of £12,570 = £6,000.
Total savings income = £6,000
First £5,000 starting rate will apply at 0%
Next £1,000 - Personal Savings Allowance.
NO TAX LIABILITY!
Calculate total income tax liability if I receive £4,720 from earnings and £15,000 interest from my savings account.
£4,720 + £15,000 = £19,720
£19,720 - £12,570 (Personal Allowance) = £7,150
£7,150 - £5,000 (Starting Rate) = £2,150
£2,150 - £1,000 (PSA) = £1,150
£1,150 x 20% (BRT) = £230 tax liability
Calculate total income tax liability if I receive £15,070 earnings and £20,000 interest from my savings account.
Non-savings: £15,070 - £12,570 = £2,500 x 20% = £500
Savings: £20,000 - £2,500 (SRB) - £1,000 (PSA) = £16,500 x 20% = £3,300 + £500 = £3,800 tax liability
Calculate total income tax liability if I receive £16,500 earnings and £30,000 interest from my savings account.
£16,500 - £12,570 = £3,930 x 20% = £786
£30,000 - £1,070 (SRB) - £1,000 (PSA) = £27,930 x 20% = £5,586 + £786 = £6,372 tax liability.
What is the Personal Allowance for someone whose income is £120,000?
Gross Income: £120,000
Less Threshold: - £100,000
= £20,000 / 2 = £10,000
£12,570 - £10,000 = £2,570 Personal Allowance
What is the Personal Allowance for someone whose income is £110,000?
Gross income: £110,000
Less threshold: -£100,000
= £10,000 / 2 = £5,000
£12,570 - £5,000 = £7,570 Personal Allowance
Calculate total income tax liability for someone who earns £170,000 per annum
No Personal Allowance.
£37,700 x 20% = £7,540
£112,300 x 40% = £44,920
£20,000 x 45% = £9,000
total tax liability = £61,460
Employed Income =
PAYE which includes income from pensions and social security benefits. Employed / Pension provider calculates and deducts income tax and pays it to HMRC on your behalf.
Income from property =
Rental Income, e.g. rent from buy to let
Investment Income =
Split between income from savings (e.g. interest from cash, payments from purchased life annuities and gains from life assurance contracts etc) and income from investments (e.g. dividends from equity based investments)
