Personal tax

britvic72

Just sat the tax exam today and as the question involved employment and savings/dividends income of well over £100k I needed to do a net adjusted income to recalculate the personal allowance. I deducted the company pension contributions from gross employment income first, then added on the grossed up savings and dividend income, but wasn't sure if I should deduct the £170 subscription (paid by the taxpayer and not reimbursed by the employer) to further reduce the income before deducting the £100k limit and then calculating how much of the personal allowance was preserved. Can anyone help?

PeterC

Yes you should deduct the subscription. I am assuming it is a relevant professional subscription. Taxable income from employment is the figure after allowable deductions.

britvic72

Yes I'm pretty certain it was a relevant professional subscription. Upon discussion after the exam, one of the other students did not deduct the subscription before deducting the £100k and calculating the reduced personal allowance, but instead deducted it after she had deducted the reduced personal allowance. Therefore my personal allowance would have been £85 higher than hers as my income calculation had been reduced by £170 more than hers. Hope that makes sense.

PeterC

You are still correct. Adjusted net income is based on net income. Taxable income is net income less (just) the personal allowance. There are no more deductions after that, although your colleague seems to think otherwise.

britvic72

Thanks Peter. I wasn't sure if I had done it right so feel better about it now