How to do the workings for this question?

lucyf

Hi

Would you please help me to explain the answer for Personal Tax 2016/17, Assesment 1, 8b. Please see below.

Chen is a basic rate taxpayer. He has a company car for the whole of 2016/17. It is a Ford car which has a scale charge percentage of 13% and an assessable benefit in kind of £2431. He has been offered a Volvo car which cost the same as the Ford, but with a scale charge percentage of 7%.
If Chen chose the Volvo on 6 April 2016, this will save him £224 (ANSWER) in income tax for 2016/17.

Could you explain why the answer is £224 please?

fournaanjez

Working back from the benefit in kind we can find out that the list price of both cars is £18,700 (2431/13=187x100=18700)

Then find out the benefit in kind for the Volvo which is £18700 x 7% = £1309

Tax due on the Ford is 2431 x 20% = £486.20

Tax due on the Volvo is £1309 x 20% = £261.80

Saving in income tax is 486.2-261.8 = £224.40 or £224 to nearest whole £

lucyf

Thank you very much Fournaanjez, that's really helpful

hertshornet

does anyone have template for tax as exam didn't have any - very different to previous exams with headings or drop down boxes or drag drop