Income tax Flashcards
A taxpayer is a partner in a small catering business. The following information relates to their income and other related tax affairs for the current financial year.
· Trading profits for tax purposes £73,000
· Savings related income £2,250
· Receipt of £5,000 from the sale of a painting
· Dividend on shares in ICR Plc £1,000
· Contributions made by the taxpayer into a personal pension scheme £5,000
· Interest on a loan the taxpayer took out to inject further capital into the business £3,500 per annum
What is the taxpayer’s net income?
A. £66,750
B. £76,250
C. £71,250
D. £67,750
E. £72,750
D
(73,000+2,250+1,000) - (5,000+3,500) = £67,750
The receipt of £5,000 for the sale of the painting is a one off transaction and so is a capital receipt, not income.
A taxpayer has received £5,000 in respect of interest on a savings account they have with an online bank. They already have taxable income (which is all non-savings income) of £35,000. The current basic rate tax threshold is £37,700.
Which of the following statements represents the correct amount of tax the taxpayer should pay on the interest?
A. £1,360
B. £900
C. £1,000
D. £1,800
E. £1,460
A.
The correct calculation is:
Interest 5,000 Other non-savings income 35,000 Available Basic Rate (37,700 – 35,000) 2,700 Interest will be taxed as follows: £500 @ 0% PSA nil rate £0 Remaining Basic Rate (2,700-500) 2200 @ 20% £440 Higher rate for remaining 2,300 @ 40% £920
Total tax payable on savings£1360
