Taxable Income

Question 1

What order is income taxed in?

Answer 1

• Non-Savings
• Savings Income
• Dividend Income

Question 2

What types of income are exempt?

Answer 2

• Dividend and interest income from cash invested in an ISA (and capital growth on cash held in ISA).
• Damages awarded as part of personal injury claim and interest thereon.
• Scholarships/grants, only if paid directly to student.
• Prizes, lotto, gambling winnings.
• Premium bond prizes.

Question 3

What is the maximum amount that can be invested in an ISA in a single tax year?

Answer 3

£15,240

Question 4

How is the personal allowance reduced for income over £100,000?

Answer 4

Reduced by £1 for every £2 over the £100,000 limit. This means at £122,000, the entire personal allowance is reduced to £0.

Question 5

What is the formula for restriction the personal allowance?

Answer 5

£11,000 -

1/2 x (net income - £100,000)

Question 6

How is the personal allowance restriction calculated if the taxpayer has made charitable donations/pension payments?

Answer 6

We use adjusted net income (total income - charitable donation/pension contribution) as the net income figure in the restriction formula.