Help with Personal Tax (Finance act 2016) question from Osborne book

Amelia_E
Amelia_E Registered Posts: 4
edited February 2018 in Personal Tax
I'm doing the questions from the Osborne workbook for Personal Tax (Finance act 2016) and I don't agree with the answer given.
The question is as follows:
Rachel had employment income of £91,500 and received dividends of £17,500. She paid £1,200 (net) into a personal pension scheme.
Calculate her total income tax liability (ie before deduction of tax paid) for the tax yea

The solution in the back of the book calculates the adjusted net income as £91,500 + £17,500 - £1,500 = £107,500 and revised personal allowance of £11,000 - 50% x (£107,500 - £100,000) = £7,250. However, this doesn't include the dividend allowance does it? Therefore, for the adjusted net income I got £91,500 + £17,500 - £1,500 - £5,000 = £102,500 and revised personal allowance of £11,000 - 50% x (£102,500 - £100,000) = £9,750.

Can anyone clear this up for me? If anyone wants to see it in the book, it's page 18 question 5.5.

Thanks.

Comments

  • PeterC
    PeterC Registered, Tutor Posts: 226
    Adjusted net income is total taxable income before any Personal Allowances and less certain tax reliefs, for example:

    trading losses
    donations made to charities through Gift Aid
    pension contributions paid gross (before tax relief)
    pension contributions where your pension provider has already given you tax relief at the basic rate

    See: https://gov.uk/guidance/adjusted-net-income

    I'm afraid dividend allowance does not feature in this calculation.
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