personal tax

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can someone tell me if tax liability is the tax that you actually owe, or the amount that you owe tax on, the books seem to use the term to mean each thing.
Also is income from rentals and holiday lettings taxed at the same rate as income i.e 10,22,40%?

Last qu, do all things; divs, savings income from renatals and holiday homes, employement inc and capital gains fall into income tax?

Thanks for your help.

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:personal tax

    A tax liability is the amount you owe for the tax year in question. This could be the same as the tax payable but the tax liability could be reduced by on account payments which have been made. Tax liability therefore may not necessarily be the same as tax payable.

    Rental income (presumably you mean from houses etc) is taxed under schedule A and is taxed at 10% 22% 40% etc.

    There are special rules for holiday lettings - furnished holiday lettings I mean. The income from the lettings is taxed under schedule A (like rental income) but Schedule D case I rules apply - schedule DI is income from a trade (except, however, for the basis periods).

    Your last paragraph: all this type of income does fall within the realms of income tax. Note, savings income is taxed at 20% for a basic rate taxpayer, rather than 22%. Dividend income is taxed at 32.5%% for a higher rate taxpayer and capital gains tax is taxed at 10%, 20% or 40% depending on the taxpayers status (i.e. basic or higher rate).

    It might be worth mentioning the order in which a personal tax computatin works. Income is taxed in the following order:

    - Non-savings income
    - Savings income (excl dividend income)
    - Dividend income

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:personal tax

    Thanks Steve, Would tax liability therefore be the tax payable after deducting the personal allowance, and tax suffered aswell as on a/c payments?

    would I need to know about DI rules for the exam or just the %s to work out the tax?

    In relation to your last paragraph would you calculate the tax for income from employment and capital gains first before doing the savings and divs? I thought the order went employment (non-savings), savings, divs and then the highest tax band will be applied to capital gains as personal allowance can't reduce this?
    Thanks
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:personal tax

    The tax liability is the tax that is payable for the year excluding any on account payments that have already been made. The liability is the statutory taxable income (STI) that has been passed through the tax bands (10%, 22%, 40% etc). The tax payable is the tax liability less any on account payments made in the tax year.

    The D1 rules are the same rules for calculating the taxable income for a sole trader (profit per accounts, add depreciation, less capital allowances etc) so you should know these rules anyway.

    You have answered the last paragraph yourself, as the order of taxing income is non-savings, savings and dividend income.

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:personal tax

    Thank You so much for your help, can I just say these forums are fantastic, I don't how I would manage without them!!!!

    Can I just ask your answer to the D1 part is this covered in business tax because I haven't covered anything about depreciation in personal tax, apart from the wear and tear of furniture which you deduct not add!!?!?!!?

    Thanks
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:personal tax

    I think it will be covered in business tax as D1 is trading profits.

    If you've not come across it in personal tax, don't worry too much.

    As it is some years since I did AAT I don't know what personal tax covers.

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:personal tax

    Schedules are only covered in business tax, as these are not income gained in employment, which is what personal tax covers.

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