Income Tax

Question 1

6 steps for calculating income tax?

Answer 1

1. Calculate gross income for the year
2. Make allowable deductions to determine ANI
3. Deduct personal allowance to determine taxable income
4. Calculate any extended BRT band
5. Apply tax at appropriate rates
6. Credit for tax deducted at source and tax reducers

Question 2

Annual Remittance Charge?

Answer 2

The Annual Remittance Charge
If Taxpayer aged 18 or over, and
Un-remitted foreign income or gains are in excess of £2,000

OPTIONAL CHARGE is:

£30,000pa if taxpayer UK resident for at least 7 of the last 9 tax years

£60,000 pa if taxpayer UK resident for at least 12 of last 14 tax years

£90,000 pa if taxpayer UK resident for at least 17 of last 20 tax years

If the Annual Charge is paid the taxpayer will then be able to take advantage of the Remittance Basis and thus avoid UK tax on income and gains earned outside the UK, as long as they are NOT remitted back to the UK.