Income tax Flashcards
1
Q
List the 5 steps to calculate income tax in order.
A
- Total income - Add together non savings, savings and dividends income. (gross up savings and dividends income)
- Net income - Subtract deductible payments
- Taxable income - Deduct personal allowance (9,440)
- Apply relevant tax rates: non-savings, savings, dividend
- Total tax liability - Add together tax payable at step 4
- Tax payable to HMRC - subtract tax paid at source (grossed up tax amount)
2
Q
How do you gross up savings?
A
Multiply by 100, divide by 80
3
Q
How do you gross up dividends?
A
Multiply by 100, divide by 90
4
Q
What is the total tax liability?
A
Tax payable before deducting tax paid at source
5
Q
What deductions should be made at step 2?
A
Pension
Charges (loans to buy shares/partnerships/co-operatives)
6
Q
What is rent?
A
A form of non-savings income
7
Q
When is personal allowance not available?
A
When reduced by £1 for every £2 of net income over £100,000
8
Q
Benefits in kind are a form of income receipt. True or false.
A
True. As such they should be included in the figure for total income.