Basic Income Tax Calculation

Advanced Taxation
Tutor : Owais
Mirchawala
 Practice Question No. 1: Practice Question No. 3:
Individuals -
Basic Income Tax Calculation Mr. A has following Incomes for the year:
-
- - => Mr. A has following incomes for the year:
=
-

Incomes · Employment Income 30,000 -

-
individual tax
earned
by an
during a
year
· Employment Income 40,000
-

are divided in three heads

for
tax purposes.
·
· -
Trading Income 20,000
Property Income 10,000
·
·
Property Income 35,000
Trading Income 9,000 -

1 incomes Normal
Saving
Non > incomes
Compute Tax Payable?
- Compute Tax Payable? -

2
Saving income > interest income

3) Dividend income >

Profit Distribution
Companies Income Tax Return Income Tax Return Non
Saving
from
40
Tax Return Dividend
Employment
Non
Saving Saving Non
Saving
-
,
000

Employment 100
35, 000
Tax
Property
30 000
Employment income XXX >
-
- - -
-
,

9000
trading
7540
Trading income XXX 20000 # 37,700 x 20 %: 7540
Trading x 20%
=> -
-
-
-
=
,

9730 40 %: 33 730 492

3892 Total 84, 000 40%:
Property Property
X XX 10 . 000 x
income x 13
income
-
·
- ·
· ,
,

-
REIT income XXX - =
Total income 60 ,000 47 430
,
11 432
,
Personal allowance (12 570)
. 71 430 ,
21 032
,

- Trust income XXX

-
XXX Personal allowance (12 570), Taxable income 71 430
,

-
Pension income XXX = -
Taxable income 47 430
,
~

-
Interest income -
XXX =

-
Dividend income - -
XXX

-
Total income X XX XXXXXX

Personal Allowance (12 570) (xXx) (XXX) Real Estate Investment Trust (REIT)
-

,
Practice Question No. 2:
Taxable REIT
fund
income XXX XXX XXX
mutral investment
Mr. A has following incomes for the year: which raises
from
-
-

is a
- -

-
-
Tax Rates Nis · Employment Income 50,000
-

w
public and then invests it in Real Estate OR Property
· Property Income 25,000
Basic rate band 1 37 700 20 %
market

=
~
= ,
,

· Trading Income 5,000 W

rate band 40 % REIT &
Higher through rental Capital
37 701 125 140 those
gains
earns income
-
= on
-

Compute Tax Payable?

, ,

Additional rate band 125 141 45 % REIT distributes its

-
:
,
X
property. then income
among
its

Income Tax Return Non

Saving investors .

Personal Tax
Employment
allowance 12 570 50 000 > An investors invests in REIT rather than real
purchasing
-
-
-
=
, ,

Property * 7540 estate

directly because it reduces
-
25
, 000 = 37 700,
x 20% = risk .

5000 29 730 40%:

Tax
Trading 11 892 REIT by experts
x
UK is 1 is
managed
,

year of
-
=>

to 5th Total 80 000 67 430 19 , 432 In

gets pooled
-
6th April April income . ,
2
. REIT risk in
multiple properties.
Finance Act <Tax Personal allowance (12 570) dividend
filing 6th individual REIT then
2025 2025
- =

April . When
-
an

gets from
5th April 2026 Taxable income 67 430
,
its taxation issues will be :

Relevant June It be taxed

for will
1.
exams in 2026
September 2026 as a Non
Saving income
-

,
,

December 2026 & March 2027 2

. It will be taxed in
receipt basis

Tax (25/26) tax is

With-holding
6 4 2025 . 4
5 2026 20 %
3
)
year
- . . .
=

1. 4 . 2025 31 3 2026
. .
> Tax deducted at source .
 Practice Question No. 4 Practice Question No. 6
Mr. A has following incomes for the year:
=>
-
Mr. A has following incomes for the year:
- -
Dividend Income
-

· Trading Income 52,000 · Trading Income 25,000 Dividend distribution

F
done
income
refers
to
profit by a
-

#
-
-

· Pension Income 2,000 · Pension Income 18,000

Net WH
=
20 %
- 6,000 > Net company.
-

· REIT dividend 9,000 > - >

-

· REIT dividend - >

-
WHT
= 20 %
- =

Dividend received individual tax

Compute Tax Payable? Compute Tax Payable? - income
by an
during a

head
year
is
classified
as a
separate of
income as

Income Tax Return Income Tax Return dividend has tax

Saving Non
Saving separate
Non income rates .

Bands
Trading 52 000
Trading , 000
25 Tax N/S Dividend
-
-
,

. 75 %
8
-
Pension 2 , 000 -

Pension 18 000
,
>
TX -
Basic rate band = 1 3 ,700 20%

S S
REIT 7540 3. 75 %
REIT 11 250 6000 7500
Higher rate 40 % 3
-

: 9000 x 100% ,
·
= X100 %: 37 700
,
x 20 % =
-
band = 3740 125 140
,

80 % 80 % 230 ↓ 40 %: 92 - Additional rate band = 125 141,

X 45% 39 35 %
.

Total income 65 250 ,

Total income 50 500,
37 930
, 7632

Personal allowance (12 570) ,

Personal allowance (12 570) .
Tax Credit (1500 -

First 500
of dividend income are taxed at 0% rate.

Taxable income 37 930

Taxable 52 680 Tax
Payable
income , ,
6132 -

No WHT on dividend income .

Tx - 37 700 ,
X 20 % = 7540

·
14 980 ,
X 40 % = 5992

52 680 , Tax liability 13 532,

Tax Credit (2250)

Tax
Payable
11 282
,

Practice Question No. 5

Mr. A has following incomes for the year:
- -
-

· Trading Income 14,000

=
-

· Pension Income 25,000

· REIT dividend 11,000 Net -

Wh
Compute Tax Payable?
-

Income Tax Return Non

Saving
Trading 14 000
-

Pension 25
, 000
S

-
REIT = 11 000
,
x 100 % 13 ,750 > Tax
=

80 % -
37 700
,
x 20 % = 7540

Total income 52 , 750 .

2480x40%: 992

Personal allowance (12 570) , 40 ,

180 8532

Taxable income 40 180 , Tax Credit (2750)

Tax
Payable
5782
 Practice Question No. 7 Practice Question No. 8 Practice Question No. 9
Mr. Z has following Income for the year:
= - - Mr. B has following Income for the year: Mr. A has following Income for the year:
* - - - -

- Trading Income of 39,000 - - Trading Income of 27,000 - Employment Income of 12,000

--- -

- Employment Income 4,000

---
- -

=
- - Dividend Income 20,000 - Dividend Income 7,000
- Dividend Income 10,000 -
- -

- - - REIT Dividend 5,000 WHT

= -
-
= 20% -

Net - REIT
-- Dividend 4,000 WH 20% = -

Net
Tax Payable?
- Tax Payable? Tax Payable?
-

Income Tax Return Dividend Income Tax Return Dividend Income Tax Return
Non
saving
Non
Saving Non
Saving Dividend

Trading 39 000
Trading 27 000
Employment 12
-
-

000
F
-
- -

, , ,

Employment Dividend
4 000 20 000 Dividend 7 000
,
= -
- - -
-
, ,

. 000
5 S 4 000
,
-
Dividend -
10, 000 REIT X 100 % 6250 -
-
REIT =
X 100 % -
5 000 F

80%
=
80%
-

Total income 43 ,000 10 ,000 Total income

33 250 .
20 000 , Total income 17 ,
000 7
, 000
Personal allowance (12 570)
,
Personal allowance (12 570) .
Personal allowance (12 570) ,

Taxable income 30,430 10 000

, Taxable income
20 680 .
20 000 , Taxable income 4430 7 000 ,

= 6006
Tax
=

30 , 430 30 430 .
x 20 % = : 20 68 20 .
680 x 20 % = 4136 N/S :
4430 4430 x 20% = 886
,

Div .: 10 000
.
500 X0 % =
0 Div . : 20
,
000 500 X 0% = O Dir .
= 7 000
,
500 X 0% =
0

6770x875 %= 529 16 520

, x 8 75%:
.

1446 6500 x 8 75 %
.
:
569
37 700 37 700 Tax 1455
Liability
. ,

2730 x 33 75%
.
921 2980 x 33 75%: 1 006
.

,
Tax Credit Doo
Tax 6588 Tax 455
Payable
Tax
liability 7536
liability
Tax Credit (1250)
Payable
Tax 5338
 !
-rust
I Income Practice Question No. 10 Practice Question No. 11
-
Trust is a
separate body in which Donor donates Mr. Z has following Income for the year: Mr. J has following Income for the year:
- - -
- - -
-

trustees
assets
,
which are
managed by for
the
benegit -
-
Trading Income of 17,000
- -

Income received from DT 9,000 > WHT -

= 45% -

Net
-
-
Property Income of 18,000
=
-

Income received from DT 10,000 -

WHT 45 % =
-

Net
of beneficaries
- - -

---
-
.
- Dividend Income 25,000
-
- Dividend Income 20,000
- -

Trust created due to

following
-
is reasons :
Tax Payable?
-
Tax Payable?
-

1 Income is to be to those who cannot

given
it themself Income Tax Return Dividend Income Tax Return Dividend
manage
Non
having Non
Saving
2
. Income to be
systematic Trading 9 17 000
Property 18
-

is
given
000
-

in manner
-
-
, ,

S 10 , 000
000 3
DT 16 364 DI X
18 182
-

. Trust created tax 100%

-

3 X 100 %
,

for planning
is income
-
-

55 %
-
=
.

55 % , ,

4, Trust created inheritance tax planning. Dividend 25 000 Dividend 20 000

for
- -

is
-
-
. .

Trust created Total 33 364 Total

during life OR
be at time death income 25
, 000 36 182 20. 00
can income
of
-

.
,
.

Personal allowance (12 570) Personal allowance (2 570)

Trust can be created
of
two
types :
-
, .

Taxable income 20,794 , 000

25 Taxable 23 612 20 000
↓
Discretionary Trust income .
.

Interest Tax
Tal:
2
. in Possesion Trust .

Discretionary Trust Nis =

20 794 . 20 794 ,
x 20% = 4159 23 612.
23 612 .
x 20% = 4722

Discretionary Trust (DT) to discretion Div 500 0% O Div. 20 500 X0% 0

according 25
, 000 X
operates
=
- .: = .
000 =

trustees take all decisions 16 406 x 8 75%:

.

1436 13 588 x 8 75 %: 1189

Trustees
.

can
of .
in , .

37700 37 700
trust
this
Beneficaries have
fixed rights
no
.
,
,

created 8094x33 75%: 2732 5912 x 33 75%: 1995

for
DT tax
planning purpose.
is income
- . .

Tax 8327 Tax 7906

-

Income received
from DT is taxed in
following
manner
liability liability
Tax Credit [7364) Tax Credit (8182)
on
beneficary :

963 Tax
1 It will be taxed on
receipt basis Tax
Payable Receivable (276)
2
. It will be taxed as Non
Saving income

45 %
With-holding tax
3
. is

Interest in Possesion Trust

IIP to instructions
operates according of Donor
-

defined in trust constitution OR will

of
Donor ,

Trustees the trust and

are
just an
employee of
-

to
they have instructions
followwill
Donor
of
in Constitution OR
trust dividend
Beneficaries
However
have
defined rights
in IIP and
i
earns
from
-

trustees them . then WHT will be 8 75 %.

change
cannot source
.

Income IIP taxed

4 For head
depend
following
is will
of
in income
from beneficary
manner
-

on
beneficary from
trust
on source
of
: income .

1 It is taxed on accrual basis

. Wit
2 will be trust
from
20 % earns

if
Non Saving OR Saving sources .
Practice Question No. 12 Practice Question No. 13 Practice Question No. 14
Mr. Z has following Income for the year: Mr. G has following Income for the year: Mr. G has following Income for the year:
F & -
& - -
- - -

- Property Income of 16,500 ~

- Employment Income of 6,500 -- Trading Income of 30,000
Net
-

Net
- =

45 %
-
&

Net - Income received from DT 8,000 > N/S WHT 45% - Income received from DT 10,000
-

- Income received from DT 8,000 WHT: 45 % WH

- -
- =
=
-
- -

Y
-
- - - -
-
-

- Income received from IIP 8,000 (earned from dividend source)

=

~
-

- Dividend Income 7,000

= -

- Income received from IIP

=> 5,000 N Net
- Income received from-
WHi 20%
whi 875
- = -
-

Wet
-

REIT 6,000
-

&

-
F

- Dividend Income 18,000

-

Tax Payable? Y WH 20
-

-
~- Dividend Income 11,000 -
%
-
:

Tax Payable?
Tax Payable?
Income Tax Return
-

Income Tax Dividend Dividend

Return Non
Saving Non
Saving
6500 Return Dividend
Employment e
Income Tax
Saving
Property
16 500
,
& -

Non
8 000 J S
14 545 14 545
Trading
,
x 100% X100% 30 000
-
=
- -

55% . 55 % . ,

100
, 000
Dividend -

7000 IIP
5
80%
X100% 6250 >
-

DT =
X

8 000 >
Dividend 18 8767
-

lIP =
,

Total income 31 045 7 , 000

-

000 -

91 25 %
.
X100 % =

, ,

Personal allowance (2 570) Total income 27, 295 18 000

-

REIT :
6 ,
000 - - -
X 100%
>
-

7500 -

20%
.

Taxable income 18 475 .

7000 Personal allowance (12 570)
. -
Dividend - 11 000
,

Taxable 14 725 18 Total 55 682 19 767

Tax income , .
000 income , ,

Personal (12 570)

T13
N/5 = 18 475
,
18 475 x 20% = 3695 allowance ,
,

Div . : 7 000
,
500 X 01 = 0 = 14725 14 725
,
x 20 %: 2945 Taxable income 43 112 ,
19 767
,

8 75%
6 500 x =
569 Div 18 000 500 x0 % 0
Tax
.

=
,
=
,

Tax 4264 17 500 x 8 75%: 153) 43 112 37, 700 20 %: 7540

liability W/S X
.

, : ,

Tax Credit (6545 Tax 5412 4%

liability 4476 X = 2165

(228) (E)
-

Tax Receivable lay Credit 43 , 112

Tax Receivable (3319) Div . -19767 500 X0 %= 0

19 267 x 33 75%
.
= 6
, 503
,

Tax
Liability 16 208
8182
,

Tax Credit 767

1500

Tax
Payable 5759
 Practice Question No. 15
Saving Income Practice Question No.16

during
Mr. G has following Income for the year: Interest earned individual
income
by an a Mr. N has following Incomes during the year:
-

T -
=> >
& - -

-
~ Employment Income of 22,500 tax head
classified ofSaving
~
- Employment Income of 23,000
is in income .
year
-

- Income received from DT 12,000 WH 45 %.

=
=

~
-
-

=
- Income from DT of 7,000 > WHT 45 %
~
=
- :

Tax
ofSaving
v
=

rates
= -
- -
incomes
- Income received from IIP 14,000 =>
WHT 20 % are :
WHT 8 75%
-

- -
- -
=

-- Income from IIP 7,500 (IIP earns from Dividend Income)

>
- =>
-
.

- Income received from IIP 6,000 (earned from dividend source)

-

V
- Dividend Income 25,000
&
* WHHT-8. 75 :1.
-
=

700 E Saving
Dividend
~
- Income from Bank Interest is 14,500
- Dividend Income 13,500
> -

>
- =>
-
Basic Rate band = 1 37 ,
.75 %
8 - -

Tax Payable? Tax Payable?

40 %
-

Rate band 125 140 40% 3. 75 %

3
Higher 37 70 -
-
: ,
,

Insme Tax Beturm Additional Rate band 39 Income Tax Return

Saving 45%
Saving
Dividend
Dividend 45 %
Saving
Now -
: 125 141 ,
& .
35 % Non

Employment
23 , 000

Employme
22 500
* -

available
.

D >
In tax rate band X100 %
12 727
Saving
21 818 Of is
& T -

income
-

, 55 %
.

7500
14 000 I 3

P
19 500
IIP x 100 % 8219
*

8:
, -

8: 100
-
-

: , 2 5%

6 000 *
6575 El Bank interest
14500
tax
* 100%
if
a
person basic rate
payer
,

000 is
=> - - & -

⑨ I : 51
,
:

Dividend #500 rate tax Dividend 13 500

-

25
higher
is
000
if
a
person payer
& -
-
>
- ,
,

Total 61 818 31 575 to additional rate tax Total income 35 127

,

14 500 21.719
if person payer
income , .
-

a is ,

Personal (12 570) Additional % band Personal allowance (12 570)

for saving
allowance ,
-
0 is availatule income ,

49 31 575 Taxable 14 500 21 719

first
Taxable 248 lies 5 taxable 23, 157
I saving
income in income +
of
income ,
,
,
000
,
+ ,

T income . This 0% band is available on initial [5, 000 =

3376
49 24 it to rate tax
N =
,
37 700 ,
20 % E 75445
of
taxable income
if
relates
Saving income .
Higher Payer
11 548
,
40% =
44619 -
Interest income is taxed on receipt basis Tax
-31 575 500 Interest National and 23 , 157 4631
Saving certificates
Div * OE ⑧ income Ns 23 157 X 20 %
from
-
=
. . =
,

33 75 = 10488 14 500 500 P

Saving
tax. 0%
331 075 Individual
Saving
X
Account
=
income
exempt from
.

. is : ,

Tax There 800

Liabilit 14, 000
22 652 investment X 20 % 2
limit National
Saving
=
·
is no in ,

9818
Tax Credit 500 0 % 0
Certificate Dividend 21 , 719 X =

3500
:

575 ISA 38 157

-
However in maximum investment is20 000. , ,

Payyable 21 219 T16/

Tax 8759 However x 33 75%:
There interest
Normally
.

-
is no WH on income. ,

Tax 14 592
I
interest income is
from
unlisted
company
loan notes liability ,

then 20 % WHT will

apply.
Tax Credit (19)5727

Tax 8146
Payable
 Practice Question No. 18 Practice Question No. 19
Practice Question No. 17
Mr. N has following Incomes during the year: - Mr. N has following Incomes during the year:
Mr. N has following Incomes during the year: -

-
=>

Pension Income of 17,000

-

-
>
- -
T => -

-
-

~
-

- Property Income of 27,000 - Income from DT of 5,000 > WHT 45 %

==
=
- Pension Income of 16,500 - -
-

- - IIP of 18,000 > N/S

- - - -

- Income from WHT Interest Income from National Saving Certificate 6,000 Exempt
-

- Income from DT of 9,000> WHT 45 % -

=
- -
= 20 %
~- -
-
-

- - z

T
- Trading Income 15,500 - Bank Interest 29,000 - Bank Interest 32,000
- -
=>

- Income from Bank Interest is 16,500 - Dividend Income 7,000

-
- Dividend Income 19,000
* -

-
- Dividend Income 10,000 Tax Payable? Tax -
Payable?
>

Tax Payable? Income Tax Return

Saving Dividend
Income Tax Return
Saving Saving Dividend Saving
-
Non Non

Pension
Income Tax Return Non
Saving Saving Dividend
Property 18 27 000 17 000
- -

, ,

000 , 000
5 >
Pension lIP 22 500 9 091
, -

16 500 - -
80% /100 % - -
DI x100% - -

55 %
·
- -
.
, ,

9 S
-
DT =
,
000
X 100 % 16 364 -
>
-

Bank interest =>

29 000 *
-
National Sav Cert .
.
- -

55 % , ,

Trading 15 500
,
- ·

Dividend -
7 000 ,
-
Bank interest -
32 ,000 &

-
Bank interest =
16 500
,
*

Total income 49 500 ,

29,000 7 000
,
-

Dividend -
-

19 ,000

·
Dividend -

10 .000 Personal allowance (12 570) .

Total income 26 091 ,
32000 19 000
,

Total income 48 364 ,

16 500
,
10 000
,
Taxable income 36 930 ,
+ 29 000 ,
+ 7 000
, Personal allowance (12 570)
,

Personal allowance (12 570) 72 930 Taxable 13 , 521 32 , 000 + 19 000

Higher
,
=
.
>
- income + ,

Taxable
36
35794 + 16 500 + 10 000
64 521
Higher
income ,
, = -
.

930 7386

13
62 294- 36 930 20 %

Highea tax
= , ,
Y =
.

13 521
Saving 29 000 Joo X 0% P 13 521 X 20 % 2704

13
= =
: ,
: , .

35 ,794 270 54 500

= 35 794 ,
X 20 % =
7159 X 20% =
Sav .
= 32 ,
000 X 0% O

23 679 4736
Saving : 16 500 500 X O% = O 37.700 ,
X 20% =
,

1406 X 201 281 x 40%: 11 292 37, 700 =

=
28 230 , ,

37,700 Dividend : 7 000 500 X 0% = O 7821 X 40% =

3128
,

19 000 500 X0 % O
14 594x40 %= 5838 6500 x 33 75: 2194 Div
. =
=
.
.
,

Tax 18
liability
500 0 20 926 500 33 75 % 6244
Dividend 10 X 0% x =
.
=
:
,
000 . .

9500 x 33 75%:
.

3206 Tax Credit (4500) Tax

liability
16 812 ,

16 484 (4091)
Payable Tax
Tax Liability , Tax 16 426 .
Credit

(1364)
Tax
Payable
Credit Tax 12 721
,

Tax
Payable 9120
Practice Question No. 20 Practice Question No. 21
Mr. N has following Incomes during the year:
Qualifyling loan interest Expense
If
thatow Qualifying
Mr. N has following Incomes during the year: 600
-
an individual takes loar purpa
X 20 %
F - = a

400 , 000
3
-
- -

>
2
.000 X 20 % = -

- Trading Income 7,000 -

- > -
-
-
- Employment Income 4,000
-
- -
then interest
expense on

- Income from IIP of 2,000 (gross) W 20 % - - Income from REIT 3,000 (gross) WHT 20 % -
=

deductable total
- - -

income
- -

- Interest Income 30,000 from unlisted company loan notes.

- Interest Income from Individual Saving Account 3,000
from
.

20
-

-
- Dividend Income 12,000
-
-

- Interest income from unlisted company loan notes 25,000 If loan in

not loan its
a a
qualifying then
-
-
= -

- Dividend Income 19,000- W 20 %

Tax Payable? deductable
against
-
interest
Tax Payable?
-
expense is
only income
of
-
Income Tax Return Non
Saving Saving Dividend The
activity to which that loan relates.

Tax
Income Return Non
Saving Saving
Dividend
Employment 4 000
Qualifying include:
-

purposes
- -

Trading T ,
000 - -
REIT 3
, 000 -
T

↓ Loan taken to purchase share in

partnership
lIP 2
, 000 Interest income
from firme
-

- -

30 000
unlisted Co >37 taken to
Individual Saving All 50p
,

&
X100% 2 Loan
purchase plant machinery
T
- - - &> &

80%
.

,
,

unlisted Dividend 12 000

partner OR
Interest income
from by behalf
of
their
firm
-

- -
-
,
a on

,000
25 >
Company X 100 % 31 250 Total 7
, 000 37, 500 12 000
by
shareholder behalf their
company
-

income
-

of
a on
80 , ,

Dividend 19 ,000 Personal allowance (7000 (5570) employment.

by employee for in
-

O use
-

,
an

Total income 9 31 250 19 Taxable O + 31 ,930 + 12 , 000 Interest only

income is available
relief
000 000
,
. ,

expense
Personal (9 000) (3570)
F1-0-
43 930-
allowance
Higher for the
first four years
.
=

,
,

only
Taxable income 0 + 27 . 680 + 19 000 3 Loan taken to invest shares
of
,

, in a

Saving
46 680- 930 ,000
5
trading
31 , 0% O
Higher
X close
Company
=
= =
.

employee-owned
0% O taken
500 4 Loan to
=
X =
invest in an

0 26 , 430 x 20% 5286

Company.
=

Dividend 500 0% O
Saving
= 27 680 ,
5 , 000 X0 % = D = 12 000
,
X =

500 X 0% = 0 5270 X 8 75 %
.
=
461
22 180 ,
X 20 % = 4436 37, 700

Dividend : 19 000 500 X0 % = O 6230x33 75 % ·

= 2101
,

9520 8 75%= 833

X
Tax Liability 7848
.

600
37, 700 Tax Credit C) 7500

8980x33 .
75 % = 303) Tax Receivable (252)
Tax 8300
liability
Tax Credit (6400
Tax 1650
Payable
Practice Question No. 22: Practice Question No. 23: Practice Question No. 24:
Mr. G has following data for the year:
T - -
Mr. A has following data for the year:
T
Mr. B has following data for the year:
- -
= - -

- ~Employment Income 18,000-

- -
- Trading
- Income 19,000 WHT 20 % =
- -Employment Income 12,000

E
-

- Interest Income Bank 22,000 -

- - -

- Interest Income from Un Listed Company loan notes 25,000 - Interest Income from Listed company loan notes 18,000
Y
- - #
- -

-
- - -
- Interest Income from National saving Certificates 14,000
- - -

- -
- -
- Interest Income from Individual Saving Account 3,000
- -
-- Income from REIT 7,000 WH 20 % -
=

- Dividend Income 12,000

-

-
- Dividend Income 16,000 - Dividend Income 22,000
ExpenseO ⑦
-

- InterestG
-
=>
-

- Interest paid on loan to acquire Plant for Employment

-

- -
Expense paid on loan to invest in partnership 4,000 - Interest Expense paid on loan to invest in Partnership business
0-
- - > = - -

for business 2,900

- - -

= 4,000
= -

for purchase of plant and machinery

- -

Tax Payable? - -

Tax Payable? Tax Payable?

>
-

Income Income Tax Return

Tax Return Non
Saving Saving Dividend Non
Saving Saving Dividend

Employment 18 0 0 0
Trading 19 Income Tax Return Saving Dividend
Saving
-
-

-
,
000 >
-

Non
,

Interest income Interest unlisted

2
2.000 income
from Employment 12
-

000
- T &
- - -

, 000
25 >
-

National Saving Certificate

- - -
Co 80% X 100 %
-

31 250 ,
=
-

Interest income -
18 ,
000 =>

T
-

Dividend - -
12 000
,
-

Individual Saving Al - = &

·

REIT = 000
, x 100 % 38750 -
-

Total income 18. 000 22 000 ,

12 000 ,
-
Dividend = -
16 000
,
-

Dividend - -
22, 000

Qua loan interest exp (2900) Total Total 18

lifying income 19 ,000 31 250 16,000 20 750 000 22 , 000
.

, income ,
,

Qua (4 000) loan interest exp (4 000)

Net loan interest
Qualifying
12 .000
lifying exp
income 15 100,
22 , 000 .
,
.

Personal allowance (12 570)

, Net income 15 ,
000 31 250 ,
16 , 000 Net income 16 750 ,
18 ,
000 22 , 000

Taxable income 2530 + 22 ,000 + 12 , 000 Personal allowance (12 570) ,

Personal allowance (2 570) .

= 36 530
,
>
-

Basic Taxable income 2430 + 31 250 + ,

16 ,000 Taxable income 4180 + 18 000 ,
+ 22 ,
000

= =
49 680- 44 180- Higher
Higher
= =
. ,

506 4180 4180

=
2530 2530 x 20 % =
X 20%: 836
2470 0% O 820
18 000
Saving 22 000
Saving O
:
,
X =
2430 2430 X 20 % =
486 =
,
X 0% =

, 000 2570
5 X0%
Saving ,000
: 31 250 = O 5
,

1. 000 X 0% = O 5 000,
500 X 0% =
0

18 530 .
x 20% = 3706 500 X 0% = 0 16 680
,
x 20% = 3 336
,

Div . = 12 , 000 500 X 0 %= O 28 180 ,

x 20% =
5636 Dividend = 22 ,
000 500X 0% =
O

11 , 500 x 8 15 % 1 006 16 000 500 X0 % 0 ,020

15 8 75% 1314
Div . :
.

X
.
=
= =
, ,

5218 3520 X 8 75%=

.

308 37 700 ,

37 700 , 6480x33 75%: 2187 .

11 ,
980 x 33 75%
.
=
4043 Tax Liability 7673

Tax liability (750)

-

10, 473 lax Credit

(6250)
Payable
Tax Credit Tax 5923

Tax 4223
Payable
 Practice Question No. 25: Practice Question No. 26: -
Basic Income Tax Calculation Mr. K has following incomes for the year:
=
-
Mr. B has following incomes for the year:
- - -

BasicFormat - Employment Income 6,000

- Dividend
tax return - Trading Income 7,500 -

of
~
-

=
-

- Interest from Bank Loan 7,500 - Interest from Bank Loan 8,000
- Non
Saving income -
Trust income
- Dividend Income 35,000 -
-

Dividend Income 15,000

-- -

- -

~ -
Personal allowance ~ Saving income
Tax Payable? Tax Payable?
interest
=

~-Tax Tax Return Total

year - Qualifying loan home Non
Saving Saving Dividend

V- 6
.000 6 000 Return Total
REIT ⑧ Planning of Personal
Employment Income Tax Non
Saving Saving Dividend
- x
-
,

allowance ·
Interest income 7500
-
7 500
, --
Trading 7 500 ,
- -

Dividend 35
,000 35
,000 Interest 8
Qualifying Donation income
-

000
-
T
- -
,

Total 48 500 6 7 500 35000 Dividend

Planning of Personal Allowance income 000 15 000
- - -
, ,
, , ,

Personal allowance used Personal allowance (12570 (6 000) (1500) (5010) Total income 30 ,5007500 8 000 15
first
is
against
000
Saving
-
Non . , ,

35930G
(2 (T500 (2000) o
Taxable income 6 000 29 930 Personal allowance
income it has
highest tax rates. ,
as

Bas
,

Then PA used > 5, 000 + 1 000 Taxable income 11 930

against Saving
N/s
after
-
income is , ,

Basic
,

- 5 000 +
tax Dividend 1 000

greater
incomes as its rates are than , ,

Tax
T
income.

PA is used Dividend at last as its tax NIS 0 0

against
- = =

6 5
, 000
Saving
%
Saving
rates are lowest .
:
, 000 X : 0 : 6 , 000 5 . 000 X 0 % = O

1, 000 X 0% = 0 1, 000 X 0 %: O

However it is
possible that PA is
not used Dividend : 29 930 ,
500 X0 =
0
Dividend 11 930
:
,
500 X 0% =
O

29 430x8 75%: 2575 11 430 X 8 75

.
% =
1, 000
saving
.

and tax
completely against payer may
income , ,

2575 1, 000
decide to leave some OR of
the
Savinincome
and PA Dividend income . This
against may happen
use
-

when
Saving income is covered in of tax band.

PA be claimed heads
can
partially against
income
-

PA carried to
forward
cannot be next
year
-
.
Practice Question No. 27:
Qualifying Donation Practice Question No. 28:

Mr. K has following incomes for the year: -

If a
person makes a donation to UK
registered
Mr. N has following data for the current year
-
- - -

%:
& -
-

it - Employment Income of 74,000

- 3600
regarded
- Employment Income 6,500 Donation.
charity then
Qualifying
is as x 100
-
=
- -

- Interest from Bank Loan 9,000

,
- Property Income of 52,000 80 %
On
Qualifying donations tax
department allows following O
-
-

- Dividend Income 13,000

-

,
- Qualifying donations of 3,600
-
- -

reliefs ↓ Compute Tax Payable?

:
Tax Payable?
-
-

Contribution tax
20% is done
by department .

Income Tax Return Non

Saving Saving Dividend 2
,
Basic Rate band will extend
by gross
amount .
Income Tax Return > As Net income exceeds

Employment 6 500 3, Adjusted Net Income will reduce

by
Non
Saving 100 000
therefore
- -
amount

gross
-

, ,

·
Interest income
A
9
.000 *

Employment 74 000, Personal allowance will

52 000 reviewed.
-

Dividend - - 13 000
,
L
Property , be

Total 28500 6 500 9 13 If ANI exceeds 100 , 000 then Personal Total income 126 Net 126
of person
income 000 000 income
-

,
, , 000 a ,
-
,
000
,

(3000)
,

Personal allowance (2 570) (6500) (3070) E1 Personal allowance (1820) (45

grossQualifying
diminishes
allowance
by for E2
,
excess.
every
·

Taxable ,930-
15 6 000 9930 Taxable 124 180
income ,
Net income XXX income ,

↓
-

Basic ,000 + 1 ,000

> 5 (xXx) Tax
gross
Personal (-)
gross Qualifying
Donation
- -

TX Personal Pension Contribution (xXX) NTS 124 180 42 200 x 20 % 8440 Pension Contribution
gross
-
: =
, ,

0 81 980 Net Inc 121 500

Adjusted 40%: 32 792
Adjusted
x
NS : Net Income XXX
,
.
.

, 000 (100 000) 124 180 (100 000

Saving :
6 000
5 X 0% -
O limit 41 232 Limit ,
, , ,
,

1 000 X 0% = 0 Excess XXX Excess 21 500 ,

,

Dividend : 9930 500 X 0% = 0 -

PA 12 570
.

94308
X 75 %: .
825 -
Personal allowance 12 570 ,
-
21 500
,
XI 40 7 s%
,

825 -
Excess X I (xxx) &

2 O >
-

Maximum 1820

Whenever Net income exceeds 100, 000

,
PA need to be Tax Bands
diminish. I 37 700 + 4500 42
reviewed
for
,
=

,
200

42 201
,
125 140 + 4500
,
=
129 640,

-
IF ANI is
18140 , OR more then PA
-
will diminish to
-
129 641 , &

12 570 x 2 25 140
8
.
=
,
-
-

ANI = 125
, 140

limit = (100 000)

,

Excess 25 140
,
-

- PA 12 , 570

-
25 140 x1
,
(12 570)
,

2 -
Practice Question No. 29: Practice Question No. 30: Practice Question No. 31:

Mr. X has following data for the current year Mr. X has following data for the current year Mr. N has following data for the current year

>0x0
-
- - - - - -
= -

-
- Employment Income 36,000 -
- Employment Income 40,000 - w Employment Income 34,000

W5
- -

~ ~
- Property Income 13,000 50 - Trading Income 56,000
- Trading Income 10,000
- x100
--
- -

%
-

- Qualifying Donation of 12,000 -

- Qualifying Donation of 15,000 - - Income from DT 7,000 -

WHT 20 %
- -Income from IIP 2,400 N/S
-
> :

- Qualifying Loan Interest expense of 2,000 >

- -
- -

Compute Tax Payable? - -

- ~Dividend Income 20,000

& x0025
- -

Compute Tax Payable?

= - He paid Qualifying Loan Interest of 5,000
-
-

- - -

Return
- He made Qualifying donations of 6,500.
Income Tax Income Tax Return - -

Compute Tax?
Won
Saving Non
Saving
-

Employment Income Tax Return

Employment 40 000
-
36, 000 -

Trading 10 000
,
-

Property 13 000 , Non

Saving Dividend <As net income

46,000
Total income > As income do not Total income 53 , 000
Employment 34 000 is 100 727 + 20 000 :
-
-
, ,
,

Personal (12 570) exceed (2 000) Trading 7.

Qualifying 120, 727 which exceeds
allowance ,
100 000
, loar .
·
56 , 000
-

Taxable need DT
000 >
33 430
Therefore interest expense 12 727 PA
x 100%
income
Therefore.
no 100,000
=
=
55 %
-
,
,

>
Tax PA Net income 51 > As Net income is less IIP 3400 3 000 will
of
review. 000 x 100% be
-
-

,
- :
, reviewed

(2 51%
F

Personal allowance Dividend

therefore
Than 100 000 20 . 000
NIS 33 430 33 430
G
no Netinc 120727
-

x 20 % - ·

= , = , , .
,
,

Taxable income 38 430 need to PA . Total 105 727 20 &D (8125)

gross
, review income , .
000 -

(5 000)
gross PPC
loan interest ,
38 Qualifying
-

Net income
,
430 38 430 , x 20
%= 100 727 ,
20 000,

Personal allowance (6269) limit (100 00 ,

Tax Bands Taxable income 94 ,

458 20000 Excess 12 602 .

-
52, 700

453
I 37 700 ,
+ ,000
15 =
PA 12 570 ,

Rate Band 137 700 94 458 Ss

45x=965x
52 , 10/ 125 140 ,
+ , 000
15 =
140 140
,
·
Basic =
,
+ 18 750
,
: 56 .
:
,

140 141- X
,

94 458
,
6269

Div . - 20 000 ,
500 * 0% = 0

19 500
,
x 33 75 %
.
= 6581

Tax Liability 35 ,
199
Tax Credit (goo 5727

Payable
Tax 28 , 872

Tax Band
I 37 ,700 + 8125 =
45 825 ,

45 826 , 140 +
125 8125 =
133 265 ,
-

133 266 ,
&
Practice Question No. 32: wh
-
As Net 19 000 + 20 000
of
Mr. D has following data for the current year -
income 165 750
,
+
, ,
:
204 750
,

- - -

PA
exceeds
therefore
-
~ Employment Income 80,000 100 ,
000 will be reviewed .
- -

--Property Income 36,000 Net 204 750

-
-

income
--Income from REIT 47,000 > WHT 20 %
,
=
-

(10 625)
= =
-

Gross
- Income from Bank interest 19,000
-
-

QD

=0x100
.
- -
-

-~Dividend Income 20,000

C S
grossNet
- -
=

- He paid Qualifying Loan Interest of 9,000

-
-

- He made Qualifying donations of 8,500.

Adjusted income 194 135
125
-
= ,

Compute Tax? exceeds PA will

Therefore
-
-
As ANI 125 140,
be

Income Tax Return zero .

Non
Saving Saving Dividend
80 000 Tax Bands
Employment
& =
-

Property 36, 000 - >

I 37 700 +
, 10 625
,
= 48 325
,

REIT 47000x100 % 58750 - &

48 326 ,
125 140 +,
10 625 :
.
135 765 ,

-
Bank interest *

19 , 000 >
-
135,766 X

-
Dividend -
-

20 000
,

Total income 174 750 ,

19 , 000 20 000
.

Qua loan interest (9 000)

Net
lifying ,

19
income 165 750 ,
,
000 20 000 .

& Personal allowance ( -

(
Taxable income 165 750 + ,
19 , 000 + 20 000 ,

= 204 750 ,
>
-

Additional
-
-

Tax =

N/s : 165 750

, 48 325x20 % ,
= 9665
87448 x 40 % = 34, 976

135 765 ,

29 985x45%
,
= 13 493 ,

O
Saving :
19 ,
000

45 %
19 ,
000 x = 8550

Dividend = 20 , 000 500 X 0 % = O

19 500 ,
x 39 35 %:.

7673

Tax 74 357
Liability ,

Tax Credit [11 750) ,

Tax
Payable 62 607 ,