PTC Query

lucyhughes2

Hi there,

i think i have missed something along the way & I wonder if someone could shed some light :001_smile:

In the Kaplan text, one of the questions on payments on account on income tax liabilities.

I reached the income tax liability amount no problem which is £7222

less tax deducted:- savings (6500 x 20%) = (1300)

However in this book the savings amount is calculated at £5200 x 20% (which is the net amount x 20%)

Is there a reason why the net amount would be used at this point as i have used the amount (100/80 x 5200) in the earlier working

I hope i haven't confused the situation

I know kaplan have made a few errors in this text and just wanted to make sure i haven't missed something crucial here.

many thanks
Lucy

111beckstar111

To gross up your savings you need to take the net amount and multply by 100 and then divide by 80.

So in this case it looks like the net amount is 5,200 x 100/80 = £6,500 which is the gross amount.

It seems above that you are then taxing this again.....don't lol

Hope this helps

111beckstar111

Is this what you meant?, slightly confused after reading your note again?

lucyhughes2

Sorry, my message was a bit confusing

Thank you so much for your reply

what i meant was, once you have the income tax liability amount you then take away the tax deducted at source to come to the income tax payable/repayable. The only tax deducted at source in this question is the savings amount & i always use the amount grossed up. I think it will be easier to put the full question here

payments on account 2008/09 totalled £3280

income for 2008/09

taxable trade profits £29710
Taxable property income £5480
Building society int £5200

Gift of £200 worth of shares to Cancer research

(a) calc income tax payable

(b) Calc balancing payments for 2008/09 and payments on account for 2009/10

Hopefully this is a bit of revision for everyone

---

I arrived at income tax payable as £7222

Less:tax deducted at source £6500 x 20% =(1300)

income tax payable = 5922

Then the balancing payment £2642 & the payments on account for 2009/10 (jan & july) as £2961

Have i confused the situation even more, he he

111beckstar111

This was how I worked it

29,710
5,480
6,500.....(5.200 x 100/80)
______
41,690
(6,035)
______
35,655

I then check thsi figure by putting the income into the correct category

Overall Income 35,190 - 6,035 =29,155
S& I 6,500
_______
35,655

The band increases due to gift - 200/100x80 = 250 .......34,800 + 250 = 35,050

So.....

29,155 @ 20% = 5,831
5,895 @ 20% = 1,179
605 @ 40% = 242
______
7,252
(1,300)
________
Tax Liability 5,952

31st Jan 09 2,976
31st July 09 2,976
31St Jan 10 the balance...

Hope that helps

Do you have answers if so was I right

111beckstar111

Sorry didn't see the payments on account balance

Would be on 31st Jan 09 5952 - 3280 = 2672

31st Jan 09 1st payment on account £2976
31st Jul 09 2nd payment 2976
31st JAN 10 balance remaining

lucyhughes2

Hi
cheers for that

but the gift of shares to charity is not gift aid so the band does not increase & it is put as a relief on total income.

The thing i was concerned about was the deductions on the income tax liability in order to come to the income tax payable amount. I also got £1300 but in the kaplan text they have £5200 x 20% = 1040.

Their full answer in the text is

Total Other Savings
Trading Income 29710 29710
Property Income 5480 5480
Building soc int 6500 6500
Total Income 41690 35190 6500
Less: Reliefs (200) (200)
Net income 41490 34990 6500
Less PA (6035) (6035)
Taxable income 35455 28955 6500


Income tax

28955 x 20% = £5791
5845 x 20% = £1169
655 x 40% = 262

Income Tax liability = £7222

Less tax deducted at source £5200 x 20% = (£1040)

Balancing payment £2902
Payments on account £3091 for jan & july 2010

---

Kaplan have made some serious errors in their texts before so i wondered whether their answer is completely right and i am missing something or whether it is just an error.

111beckstar111

What type of savings and investment is it?

lucyhughes2

Sorry apparently my table didn't work out so well in that post

it is building society interest

111beckstar111

Must be an error then becasue building society interest is received net ...which needs grossing up....can't think of what else it could be no wonder your struggling with he question...

lucyhughes2

Thank you so much for your time
It has been bothering me in that i thought i had missed something about deducting tax at source. I shall ignore it, pah Kaplan ;P

Richard

It looks as if they are treating the £5,200 as being the gross amount as £5,200 x 80/100 = 4,160, giving a difference of £1,040.

If they received the £5,200 net of interest, you have calculated it correctly.

111beckstar111

lol no probs!!