Calculating The Income Tax Liability

Question 1

Taxable income calculation

Answer 1

All income less deductible payments less personal allowance

Question 2

Personal allowance amount

Answer 2

12,570 but where adjusted net income exceeds £100k it is reduced by one half of the excess

Question 3

What is adjusted net income?

Answer 3

Net income reduced by the gross amount of any gift aid or personal pension contributions that are eligible for relief.

Question 4

Tax rates

Answer 4

37,700 @ 20% (basic rate)
87,440 @ 40% (higher rate)
Rest is 45% (additional rate)