- Basic
Rate bracket will now be extended to: £31,785 + (£960/ 0.8) = £32,985 - Interest
from ISA’s are not taxed - Interest
and dividends received will need to be grossed up - Thomas
will be entitled to the full personal allowance of £10,600, since his taxable
income is less than £100,000
|
|
Totals
|
Non-Investment
|
Savings
|
Dividends
|
Capital Gains
|
|
|
£
|
£
|
£
|
£
|
£
|
|
Employment
income |
43,000
|
43,000
|
|
|
|
|
Interest
(£1900/0.8) |
2,375
|
|
2,375
|
|
|
|
Dividends
(£1683/0.9) |
1,870
|
|
|
1,870
|
|
|
Capital
gains |
20,100
|
|
|
|
20,100
|
|
Total
income |
67,345
|
43,000
|
2,375
|
1,870
|
20,100
|
|
Personal
Allowance |
(10,600)
|
(10,600)
|
|
|
|
|
Taxable income
|
56,745
|
32,400
|
2,375
|
1,870
|
20,100
|
This
above table implies that the first item to be taxed will be £32,400 and then
the next £585 from savings income will be taxed at 20% to make up the extended
basic rate bracket (remember the basic rate has been extended from £31,785 to
£32,985 due to the gift aid donations). The rest of the taxable income will be
taxed at the applicable higher rate based on the type of income.
above table implies that the first item to be taxed will be £32,400 and then
the next £585 from savings income will be taxed at 20% to make up the extended
basic rate bracket (remember the basic rate has been extended from £31,785 to
£32,985 due to the gift aid donations). The rest of the taxable income will be
taxed at the applicable higher rate based on the type of income.
Tax liability
computation:
computation:
|
|
£
|
|
£
|
|
Taxable
employment income |
32,400
|
£32,400
@ 20% |
6,480.00
|
|
Interest
|
585
|
£585
@ 20% |
117.00
|
|
Sub-total
|
32,985
|
|
|
|
Interest
(£2,375-£585) |
1,790
|
£1,790
@ 40% |
716.00
|
|
Dividends
|
1,870
|
1,870
@ 32.5% |
607.75
|
|
Capital
gains tax |
20,100
|
£20,100
@ 28% |
5,628.00
|
|
Taxable income (same as above)
|
56,745
|
|
|
|
Total tax liability
|
|
|
13,548.75
|
You
will notice the interest is split into two lines in the table above. This is
because the savings income is the next type of income to be taxed and we need
to use up the extended 20% tax bracket of £32,985, which the taxable employment
income doesn’t cover this bracket in full; so the balance is covered in the
savings income and taxed at 20% and the remaining savings income is taxed at
40%.
will notice the interest is split into two lines in the table above. This is
because the savings income is the next type of income to be taxed and we need
to use up the extended 20% tax bracket of £32,985, which the taxable employment
income doesn’t cover this bracket in full; so the balance is covered in the
savings income and taxed at 20% and the remaining savings income is taxed at
40%.
The
rest of the taxable income are below £150,000 so they all fall into the higher
rate tax bracket and have been taxed using different tax rates based on the
type of income.
rest of the taxable income are below £150,000 so they all fall into the higher
rate tax bracket and have been taxed using different tax rates based on the
type of income.
The
table above shows that Thomas is due to pay tax of £13,548.75; remember he
would have paid some taxes already, so it’s just the additional tax amount he
will now be due to pay.
table above shows that Thomas is due to pay tax of £13,548.75; remember he
would have paid some taxes already, so it’s just the additional tax amount he
will now be due to pay.
Yours Sincerely,
The Friendly Team
The Training Place of Excellence Limited