I just wondered if someone could check this one for me. I calculated tax due is £63.770 but the answer is £60,770. So I am not sure what I am missing?
This is for tax year 06/04/2010 to 05/04/2011.
Assumptions
Personal allowance £6,475
Basic Rate Tax Band £37,400
Mr x has following income for the tax year.
Employment income £160,000
Bank Interest £8000 (net – 20% tax deducted at source)
Dividends £9000 (net or 10% tax credit)
I calculated as follows
Employment Income £160,000
Interest £10,000
Dividend £10,000
Total Income £180,000
So no PA and 42.5% & 50% tax apply.
£37400 @ 20% = £7,480
£112,600 @ 40% =£45,040
£10,000 (£160,000-37,400-112600) @ 50% =£5,000
£10,000 @ 50% £5,000
£10,000 @ 42.5% £4,250
Total tax £66,770
Less deducted at sourse £3,000
Tax liability/due £63,770.
Thanks in advance for the help.
Neil M
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Replies (6)
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Thanks JCRich & Penny Chambers
Thanks JCRich and Penny Chambers for confirming the answer.
This question is part of a CPD article. Unless I answered £60,770 I do not get cpd points credit!
The fault is in the answer
I think that this is merely a case of the answer that was supplied to you, being wrong. If you lose the PA's and run it on 09/10 rates, you get £60,770. The answer that you have been given appears to have been calculated on 09/10 rates, not the 10/11 ones.
Your £63770 is correct, the difference is £1k of divi higher rate tax on a gross £10k(42.5%-32.5%), another £1k on £10k interest etc (50%-40%) and a simlar £1k on earned income as per the interest, i.e. the differences between 09/10 and 10/11 rates.
Hope this helps.
I did not come to £60,770
I did not come to the answer of £60,770. The answer was given part of the question. I checked over and over and my answer came to £63,770. I thought if I missed any requirement of new tax rates and personal allowances, hence I posted this question for someone to check, whether £63,770 is the correct answer. You kindly took time and confirm that the answer should be £63,770.0 not £60770.
But I don't understand how you got to £60,770 -
if your calculation and my calculation comes to £63,770?
60770
Thanks Paula for your answer.
The amount of £60,770 given with the quesition on new tax rates and abatement of personal allowance for higher earner from 2010-2011.
Thanks again