Computing Tax Payable

Question 1

What is an income tax liability?

Answer 1

Amount of tax charged on individual’s taxable income

Question 2

What is an income tax payable?

Answer 2

Balance of income tax liability still to be settled in cash

Question 3

How is income tax payable computed?

Answer 3

On an individual’s taxable income

Question 4

Order the tax rates are applied?

Answer 4

To non-savings income, savings income and dividend income

Question 5

Additional rate band value?

Answer 5

> £125,140

Question 6

Higher rate band value?

Answer 6

> £37,700

Question 7

Tax rates at additional rate band?

Answer 7

NSI; 45%
SI: 45%
DI: 39.35%

Question 8

Tax rates at higher rate band?

Answer 8

NSI; 40%
SI: 40%
DI: 33.75%

Question 9

Tax rates at basic rate band?

Answer 9

NSI; 20%
SI: 20% or 0%
DI: 8.75%

Question 10

If non-savings income after PA is greater than £5000?

Answer 10

Starting rate does not apply

Question 11

What does 0% savings syarting rate apply to?

Answer 11

Savings income only in first £5000 of taxable income

Question 12

Is there a tax rate for savings income up to £5000

Answer 12

Yes it is 0%. Called the savings income starting rate

Question 13

What does savings income starting rate only apply to?

Answer 13

Where savings income falls in first £5000 of taxable income

Question 14

Where is income tax charged first?

Answer 14

Non-savings income. So it is unlikely non-savings income exceeds the savings income starting rate limit

Question 15

Savings income if the individual is a basic rate taxpayer?

Answer 15

The savings income nil rate band is £1000

Question 16

Savings income if the individual is a higher rate taxpayer?

Answer 16

£500

Question 17

What is the dividend nil rate band?

Answer 17

£1000 for all taxpayers

Question 18

What can individual do in a marriage allowance?

Answer 18

An individual can elect to transfer £1260 of their PA to their partner if certain conditions are met

Question 19

What must not be the case in a marriage allowance?

Answer 19

Neither party can be at a higher rate or additional rate taxpayer

Question 20

What are additional and higher rate tax payers have in a marriage allowance?

Answer 20

Entitled to a tax reducer which reduces the individual’s tax liability

Question 21

What if the individual has a tax liability of less than £252?

Answer 21

The tax reducer reduces the tax liability to nil