AAT PTAX FA2016 Task 4

dalmatian

Could somebody explain this one:

Complete the table below to show the amount of investment income on which tax will be paid for 2016/17 for each taxpayer. Pick the correct rates of tax that would apply to that investment income by selecting it from the list.

1st Taxpayer: Anna
Investment income source: Building society interest
Investment income received: £4,780
Other taxable income: £138,100
Investment income on which tax will be paid: £ ???
Tax rate %: 40%

2nd Taxpayer: Brendan
Investment income source: Dividends
Investment income received: £7,210
Other taxable income: £88,520
Investment income on which tax will be paid: £????
Tax rate %: 32.5%

dalmatian

Can anyone help with this one? Many thanks

lannieloo

Anna, no personal allowance...
Deduct the 500 savings allowance...
142,350 taxable
32000 x 20% = 6400
110350 x 40% = 44,140
Tax liability = 50540
Is that right?

lannieloo

Brendan
Non savings 88,000 -11000 pa = 77000
32000 x 20% = 6400
45000 x 40% = 18000

Dividends 7210 - 5000 dividend allowance
= 2210 x 32.5% = 718.25

Total tax liability = 25118.25
??

vladlenka

Hi. I was doing this as well. But the answer is easier when we think. They ask only investment income taxable amount , not total tax liability.
Thus for Anna taxable investment income will be 4780-500 (allowance as high rate tax payer)=4280£, @ 40%
And for Brendan 7210-5000(allowance) =2210£ taxed at 32.5%