Help on Personal Tax

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:32AM in AAT student discussion
I have been looking at Dec 2005 past exam.

Can anyone help

I have the following figures

Salary £38500
Benefits £6060
BSI £1320
Dividends £900

Tax rates

Starting 2020 - 10%
next 29380 - 22%
over 31400 - 40%

The answer on the tax on the salary is

2020 x 10 % = 202.00
29380 + 3600 x 22% = 7255.60
4815 x 40% = 1926.00

I can understand the 10% but I then thought you would calculate £29380 x 22% - I don't know why they are adding £3600 to £29380.

Because I don't understand this part of the answer I am also lost on the next calculation of £4815 x 40%.

Can anyone help (sorry its a long question)

Thanks
Violet

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    .
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    Is there something missing? Perhaps pension contributions which would stretch the 22% banding.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    Hi Violet

    I've just looked at the question (oh the memories!)

    The £3,600 is calculated as follows:

    Pension contributions: £234 X 12 months= £2,808 (net)
    Gross pension contrb.: £2,808 X 100/78 = £3,600.

    This £3,600 "extends" the basic rate band, meaning tax is only paid at 22% rather than 40% on this gross amount.

    Hope this helps. If you have any more questions, just ask.

    Tom
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    Hi Claudia

    Thanks for replying.

    Yes there is a pension of £234.00 p/m so would that work out at 234/78x100 = 300 x 12 months = 3600

    But how does that affect anything, not sure.


    Violet
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    Claudia,

    You are a GEM. Shall look at it again tonight (very sad person) but thanks again.

    Violet
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    I think that Tom has answered it perfectly for you :D

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    Hi Tom

    Thank you for your reply, sorry I replied to Claudia thanking her when actually the message was from you :oops:

    Yesterday at college the subject matter was pensions being included in the tax bracket so I am a little clearer now.

    Thank you

    Violet
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Help on Personal Tax

    No problem Violet, glad I could help.

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