PERSONAL TAX- understanding the sequential calculations.

Lee

Could someone please help me understand the basic calculation of personal tax where there is:
Non Savings Income
Savings Income
Dividends

I haven't grasped the concept in particuilar when the savings taxable allowance applies.
I am doing 2011/12 Tax and have no books at the moment, just get lecture from the tutor.
Taxable allowance 7475 and on savings 2560
For example:
how do I calculate tax on:
65000 gross income from employment
15000 net interest from savings
20000 dividend income

and also on

19000 gross income from employment
10000 net interest from savings

Spamkebab

There is quite a bit of information you need to know and understand to complete those tasks.
Income from savings interest and didvidends need to be grossed up, savings at 20%, dividends at 10%

you will also need to understand the different tax bands to apply to the different income, for example: Employment Income is taxed @ 20% up to 35000, Interest on savings is taxed at 10% up to 2560 unless you have any employment income to tax first.

Are those examples complete income or are you to work each one out separately?

Really, you need to study a good book.

Neil

Jo Clark

Hello Lee

I agree with Neil, you need to study a book. How comes you don't have one, are you waiting for the college to provide it?

All the advice Neil has given is spot on but it will make more sense if you have a book as those which I have seen teach the bands using a diagram and if you are a visual learner, like myself, you will find it so much easier.

I highly recommend the BPP Text and Question Bank.


JC

mrb82

We are having the same issue with our text books from Foyles. They're very popular and this is the only book still on order, but in class we have nearly completed the learning section and are going on to revision sessisons soon!

Spamkebab

How on earth do you revise at home without study texts?

I've been with Kaplan distance learning since day 1 for level 3 and 4, level 3 i had 50% material delivered to me with the rest following a couple of weeks later. Still had enough to study with, and at my own pace. Level 4 course was delivered complete 5 days after i placed the order.

Not having study material while you are studying the module is unacceptable in my "book" pardon the pun.

Neil.

Jo Clark

mrb are you studying at a college? I would have thought the college would have purchased the books in advance of the classes and they must have an idea of student numbers from enrolment?

mrb82

Yes, studying at college, our tutor is good in that he has provided comprehensive handouts, but still would be nice to have the books.

We purchase our books ourselves, the college don't buy them for us. I did email in the summer for the reading list but was not given it until last week.

Spamkebab

If you visit the BPP or Kaplan websites you can get a breakdown of the modules at each level of AAT, you can also purchase the books from these training providers or even from Amazon.

I can vouch for the Kaplan texts, i haven't used a BPP one as yet but Kaplan have got me through the exams so far without using tutor support.

Jo Clark

As Neil has vouched for Kaplan, I'll do the same for BPP, got me through level 3 and 4 all first time passes :001_tongue:

mrb82

We went through BPP for the last two levels but this year the college secured a discount through Foyles for the BPP books so we went with that. Our second tutor will be taking over in the new year, but she is using Osborne books instead. Had to nag to get the reading list from her!

Jo Clark

Buy direct from Osborne as I believe they offer a discount - check the Osborne website

Spamkebab

Hi Jo,

I expect BPP and Osbourne books will be just as good, possibly even better. I have stuck with Kaplan because it's one of those things where "if it aint broke, don't fix it" they have worked for me.

I am considering moving onto studying a chartered qual. I may try other texts, who knows maybe it'll all click easier.
It's good to know that BPP are quality too.

Thanks

Neil.

Jo Clark

Hi Neil

You're welcome - I am sure Kaplan material is good too its just I used BPP as that is where I studied. Perhaps I'll have a look on eBay for a cheap ACCA book by Kaplan to do some pre study! What chartered qualification are you considering? How much of level 4 do you have left to do?


JC

Spamkebab

I sit the Personal Tax exam next Thursday, then just Business Tax and ICAS. Hoping to blitx Business Tax before the end of October and spend the rest of this year on the ICAS. If i am done for February next year i will be a happy boy. That's the goal i set myself.

I'm rather stuck between CIMA and ACCA at the moment as i want to work in industry but the ACCA qual seems the more elusive of the 2, so more of a challenge and more of a reward.

Swinging towards ACCA at the moment.

How about yourself?

Neil.

Jo Clark

I was stuck between the two but am likely to do ACCA following a chat with several managers and colleagues at work If you need any help with BTX or ICAS let me know!

Lee

thank you everyone for your responses. I really appreciate it .
I have finally received my books from Osbourne today so I will look into it in detail.

reader

Lee wrote: »

Could someone please help me understand the basic calculation of personal tax where there is:
Non Savings Income
Savings Income
Dividends

I haven't grasped the concept in particuilar when the savings taxable allowance applies.
I am doing 2011/12 Tax and have no books at the moment, just get lecture from the tutor.
Taxable allowance 7475 and on savings 2560
For example:
how do I calculate tax on:
65000 gross income from employment
15000 net interest from savings
20000 dividend income

Regarding the first situation (e.g. 65k of salary, 15k of interest and 20k of divi):

1) Gross up your bank interest, i.e. £15,000 x 100/80 = £18,750
2) Gross up your dividends, i.e. £20,000 x 100/90 = £22,222
3) Add up all your gross sources of income, i.e. £65,000 + £18,750 + £22,222 = £105,972
4) Because the total is greater than £100,000 you need to reduce your personal allowance by half the excess above £100,000, i.e. £7,475 - ((105,972 - 100,000)/2) = £4,489 personal allowance
5) Take your new personal allowance away from your salary, i.e. £65,000 - £4,489 = £60,511
6a) Tax the first £35,000 (of the £60,511) at 20% = £7,000
6b) Tax next £25,511 (of the £62,511) at 40% = £10,204
6c) Tax gross bank interest at 40%, i.e. £18,750 x 40% = £7,500
6d) Tax gross dividend at 32.5%, i.e. £22,222 x 32.5% = £7,222
7) Add up all the tax liabilities, i.e. = £7,000 + £10,204 + £7,500 + £7,222 = £31,926 (this is the income tax liability)
8) If you need to calculate tax payable, subtract tax already deducted at source from the income tax liability, e.g. £2,222 (on the gross dividend) and £3,750 (on gross bank interest) and any PAYE deducted from the salary

reader

Lee wrote: »

Could someone please help me understand the basic calculation of personal tax where there is:
Non Savings Income
Savings Income
Dividends

I haven't grasped the concept in particuilar when the savings taxable allowance applies.
I am doing 2011/12 Tax and have no books at the moment, just get lecture from the tutor.
Taxable allowance 7475 and on savings 2560
For example:
how do I calculate tax on:
19000 gross income from employment
10000 net interest from savings

1) Gross up the net bank interest, i.e. £10,000 x 100/80 = £12,500
2) Deduct the personal allowance from the gross income, i.e. £19,000 - £7,475 = £11,525
3a) Tax the £11,525 @ 20% = £2,305
3b) Tax the £12,500 of gross bank interest @ 20% = £2,500
4) Add up the tax liabilities, i.e. £2,305 + £2,500 = £4,805 (your income tax liability)
5) If you need to calculate tax payable, subtract tax already deducted at source (e.g. £2,500 of tax on gross bank interest) from the income tax liability