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PTC Query

lucyhughes2lucyhughes2 New MemberRegistered Posts: 10
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

Comments

  • 111beckstar111111beckstar111 Well-Known Registered Posts: 158
    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
  • 111beckstar111111beckstar111 Well-Known Registered Posts: 158
    Is this what you meant?, slightly confused after reading your note again?
  • lucyhughes2lucyhughes2 New Member Registered Posts: 10
    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
  • 111beckstar111111beckstar111 Well-Known Registered Posts: 158
    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 :)
  • 111beckstar111111beckstar111 Well-Known Registered Posts: 158
    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
  • lucyhughes2lucyhughes2 New Member Registered Posts: 10
    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.
  • 111beckstar111111beckstar111 Well-Known Registered Posts: 158
    What type of savings and investment is it?
  • lucyhughes2lucyhughes2 New Member Registered Posts: 10
    Sorry apparently my table didn't work out so well in that post :)

    it is building society interest
  • 111beckstar111111beckstar111 Well-Known Registered Posts: 158
    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...
  • lucyhughes2lucyhughes2 New Member Registered Posts: 10
    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
  • RichardRichard Trusted Regular Registered Posts: 373
    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.
  • 111beckstar111111beckstar111 Well-Known Registered Posts: 158
    lol :) no probs!!
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