Need help with Chapter 6 - How are people calculating what should be taxable

JessT31JessT31 AAT Student Posts: 2
Hi I am due to sit my PTax exam in the next few days but am still really struggling with how to calculate what income should be taxable...

For example say you have £114,000 non savings income, £7,000 savings income and £16,000 dividend income. How would you go about calculating it? I seem to be doing it incorrectly and just need some tips on how to work it out correctly for the exam.

Thanks!

Comments

  • BertieBertie West Midlands Registered Posts: 376
    Just by looking at the numbers; are you taking account of the fact that there is no personal allowance as the total income is over £122,000? Assuming FA 2016.

  • JessT31JessT31 AAT Student Posts: 2
    In all of the answers it looks like in this question they don't take account of personal allowance at all? Even when income is less than 122k.

    Maybe i am reading it wrong but in this question we haven't been told to account for it. Maybe that is where i am going wrong. Yes it's FA 16!
  • BertieBertie West Midlands Registered Posts: 376
    Total income between £100,000 - £122,000 has an adverse affect on the personal allowance.

    As a broad example; for every £2 over £100,000 the tax payer will lose £1 in allowance.

    Total income £112,000
    Limit (£100,000)
    Excess £12,000

    Personal allowance £11,000
    Less (£12,000 X 0.5) (£6,000)
    New PA £5,000

    Therefore;

    Total income £112,000
    Less PA (£5000)
    Taxable income £107,000

    Adjusted net income can bring down total income, for the purposes of calculating the PA.

    For instance

    Total income £112,000
    Less Gross Gift Aid (£4,000)
    ANI £108,000.

    Total income £112,000
    Less PA (W) (£7000)
    Taxable income £105,000

    (W) PA £11,000
    Total income £112,000
    Less Gross Gift Aid (£4,000)
    ANI £108,000
    Limit (£100,000)
    Excess X 0.5 £8,000 (£4,000)
    New PA £7,000
    burg
  • vladlenkavladlenka AAT Student Posts: 4
    Hello. From what I understand there is no Personal allowance as 1st we have to plus all income £137000, so is over £122000, so no PA. (if we had some Gift aid or PPS -we could bring the income down)
  • AlisonSwansonAlisonSwanson Registered, Tutor Posts: 89
    Quite a few tasks start by giving you the TAXABLE income of an individual rather than the total income. If you are given the taxable income then the personal allowance has already been deducted. You have to be careful when reading the question.