Please can somebody help me to answer this PTC question correctly?

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
calculate tax liability

personal allowance: £5,035

salary: £31,000
building society interest: £2000 (net)
dividends totalling: £2,700
contribution paid into company pension scheme: £1,500

I'm a little confused with the interest and dividend percentages. any ideas?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    Without answering the full question for you - because I'm not sure that would help you - the bank interest has been received net. Bank interest is taxed at source on individuals at a rate of 20% so you would have to gross up the net interest using the fraction 100/80.

    Dividends are also taxed notionally at 10% so, again, you would have to gross up the net dividend using the fraction 100/90.

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    Thanks Steve, I'm alright with that, it's really the next part, where you multiply the interest and dividend . There are rules, dividend is multiplied by either 32.5% otr 40% isn't it? was about unsure what it would be in this case
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    The tax bands for your year are:

    INCOME
    10% starting rate
    22% basic rate
    40% higher rate

    SAVINGS
    20% savings rate (only if a basic rate taxpayer)

    DIVIDENDS
    10% starting rate on dividends
    32.5% higher rate on dividends (only if dividends take the income into higher rates)

    Hope that helps.

    Regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    Just to add:

    If you had no "non-savings" income, your savings income would be taxed at 10%, 20% (as Steve said) and 40%.

    The tax payable to your question is £5,124.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    Thanks for that, I know this is quite simple, but not at first, just been doing this a few weeks, quite enjoying it actually, more than CMCC.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    You shouldn't worry about how simplistic certain tasks in taxation (or any other subject) may or may not be. The forum is here for the precise reason you posted your thread and as a student it's better to seek clarification than to sit there for hours on end struggling.

    Certain areas of taxation (be it personal or corporate) are complicated and you have to have your wits about you when dealing with even the easiest of issues.

    kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    Can I just ask hopefully if someone reads this... if calculating interest and dividends when in the higher band. is it 40% for interest and 32.5% for dividends, always? I just can't seem to get a question quite right and I think it may be this part of it again. thanks.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    Dividend income which takes a taxpayer into higher rates is always taxed at 32.5%. This is because dividend income is taxed as the top slice of income.

    If bank interest takes the taxpayer into higher rates then it is taxed at 40%.

    Best regards
    Steve

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    thanks for reply, so 'if it takes it into higher band' but what if already in the higher band when we consider dividends and interest? same meaning? sorry just want to make sure. will have a good look at all this tomorrow, getting a little worried about the exam, it's so soon
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    If interest is in the higher band then it is all taxed at 40% (but taxed at source at 20%). Taxed at source means the rate of tax the bank takes off the taxpayer.

    If dividends are in higher rate then it is taxed at 32.5% but still attracts a 10% tax credit.

    Best regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Please can somebody help me to answer this PTC question correctly?

    ok thanks, I am going wrong in another part of the question then, but it is too large to just show here

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