Business Tax

neilw41
neilw41 Registered Posts: 12 Regular contributor ⭐
in AAT Level 4 (Level 8 in Scotland)
Hi

I really dont get this answer:

Question: Someone has Capital Gains, £24,800 & Net Income, £32,000.
Caluculate tax payable on their capital gains.

Answer:
Gains £24,800 (I get this)
Annual exemption £10,100 (I get this)
Taxable Gain £14,700 (I get this)

Tax @ 18% £972 Tax @ 28% £2,604 (I dont get this). I thought an individual only pays cap.gains @ 18% on taxable gains only, i.e. £14,700 @ 18% = £2,646.

Can anyone help?
Thanks. Neil.

Comments

  • dave13
    dave13 Registered Posts: 9 Regular contributor ⭐
    Hi Neil,

    I have just sat Business tax for year 2011/12.
    How I see it is because the CGT takes them into a higher tax band

    Assumptions = personal allowance 2010/11 = £6475, higher tax band £37400, CGT 10100.
    Total earnings for year £32000 + 24800 = £56800 total

    total earnings £56800 minus CGT £10100 = 46700
    earnings (£32000) minus higher tax band (£37400) = 5400 @ 18% = £972
    £46700 (total earning minus CGT allowance) - 37400 = 9300 @ 28% = £2604

    Good luck with your studies.
  • Diddy Mau
    Diddy Mau Registered Posts: 238 Beyond epic contributor 🧙‍♂️
    without doing the math, I belive it has something to do with the £32,000 incomme.
    they will be taxed on two tax brakets. this is linking your knowledge to PTax

    hope this helps
  • BeccaLouJ9
    BeccaLouJ9 Registered Posts: 896 Epic contributor 🐘
    If he is a basic rate tax payer, then CGT is payable at 18% on an amount of taxable gains up to the amount of the taxpayer's unused basic rate band and then 28% on the rest.

    I just got back from taking this exam.

    B x
  • BeccaLouJ9
    BeccaLouJ9 Registered Posts: 896 Epic contributor 🐘
    Aw, Diddy Mau beat me to it! :)

    B x
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
    neilw41 wrote: »
    Hi

    I really dont get this answer:

    Question: Someone has Capital Gains, £24,800 & Net Income, £32,000.
    Caluculate tax payable on their capital gains.

    Answer:
    Gains £24,800 (I get this)
    Annual exemption £10,100 (I get this)
    Taxable Gain £14,700 (I get this)

    Tax @ 18% £972 Tax @ 28% £2,604 (I dont get this). I thought an individual only pays cap.gains @ 18% on taxable gains only, i.e. £14,700 @ 18% = £2,646.

    Can anyone help?
    Thanks. Neil.

    Having worked it out - you are using the 2010/11 tax rates.

    Higher-rate limit is £37,400

    CGT is taxed as 'top slice' income, therefore:

    Salary = 32,000
    HRL = 37,400
    CGT bal = 5,400* @ 18% = £972

    CGT taxable gain = 14,700
    Less * = 9,300 @ 28% = £2,604

    Hope this helps.

    Regards

    Dean
  • Diddy Mau
    Diddy Mau Registered Posts: 238 Beyond epic contributor 🧙‍♂️
    BeccaLouJ9 wrote: »
    Aw, Diddy Mau beat me to it! :)

    B x
    ha ha, only just

    How was the exam???
  • neilw41
    neilw41 Registered Posts: 12 Regular contributor ⭐
    Thanks guys, very helpful. I just with the question was clearer. Have a great weekend. Neil.
  • BeccaLouJ9
    BeccaLouJ9 Registered Posts: 896 Epic contributor 🐘
    Diddy Mau wrote: »
    ha ha, only just

    How was the exam???

    It was good, I really like this unit.

    I think that there could be more questions to be honest. I finish the exams all in about an hour or so. This time was a bit less. Maybe I'll eat my words if I get a fail in six weeks time!!

    There were Q's on nearly everything I think.. I can't think of anything that wasn't in it! :)

    B x

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