COMPUTING TAXABLE INCOME AND THE INCOME

TAX LIABILITY
SCOPE OF INCOME TAX

1. Residence n s
u t io
2. Statutory residence test
o l
3. Automatic overseas tests g S
n in
4. Automatic UK tests
a r
5. Sufficient UK ties tests L e
te x
r
Ve
6. Days spent in UK

Vertex Learning Solutions - [Link]

RESIDENCY TEST

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

STATUTORY RESIDENCE TEST

n s
t io
◼ An individual will automatically be non-UK resident if they meet any of the automatic overseas tests.
u
o l
g S
in
◼ An individual, who does not meet any of the automatic overseas tests, will automatically be UK resident if they
n
r
a has not met any of the automatic overseas tests nor any of
meet any of the automatic UK tests. An individualewho
L meet the sufficient ties test.
the automatic UK tests will be UK resident ifxthey
rte
Ve

Vertex Learning Solutions - [Link]

AUTOMATIC OVERSEAS TESTS

The automatic overseas tests must be considered first. The automatic overseas tests treat an individual
as not resident in the UK in a tax year if that individual:
n s
io u t
A. o
Spends less than 16 days in the UK in that tax year and was residentl in the UK for one or more of the three
previous tax years (typically someone who is leaving the UK); g Sor
n in
a r
B. Le and was not resident in the UK for any of the previous three
Spends less than 46 days in the UK in that taxx year
r tein the UK); or
tax years (typically someone who is arriving
Ve
C. Works full-time overseas throughout that tax year and does not spend more than 90 days in the UK during that
tax year.
Vertex Learning Solutions - [Link]
AUTOMATIC UK TESTS

If none of the automatic overseas tests are met, then the automatic UK tests are considered. The
automatic UK tests treat an individual as UK resident in a tax years if that individual:
i o n
o lut
A. Spends 183 days or more in the UK during that tax year; or S
i n g
r n
e a
B. Has a home in the UK and no home overseas; or
x L
rte
C.
Ve
Works full-time in the UK during that tax year.

Vertex Learning Solutions - [Link]

SUFFICIENT UK TIES TESTS

n s
u t io
o l
S
◼ If the individual meets none of the automatic overseas tests and none of the automatic UK tests, the 'sufficient
g
ties' test must be considered.
n in
a r
L e
te x
◼ The sufficient ties test compares the number of days spent in the UK and the number of connection factors or
r
'ties' to the UK. Ve

Vertex Learning Solutions - [Link]

SUFFICIENT UK TIES TESTS

s tax years
An individual who was not UK resident in any of the previous three
n
◼ i o
tage of 18, but not including parents or
(a) UK resident close family eg spouse/civil partner, child under the
o l u
grandparents
g S
◼ (b) Available UK accommodation in which the individualin spends at least one night during the tax year
r n
◼ e a
(c) Substantive UK work (employment or self-employment)
x L
◼ te or both of the previous two tax years
(d) More than 90 days spent in the UK in either
r
◼ An individual who was UK resident inV
e
any of the previous three tax years (typically someone who is leaving the
UK) must also determine whether any of the ties in (a) to (d) above apply plus whether an additional tie applies:
◼ (e) Present in the UK at midnight for the same or more days in that tax year than in any other country
Vertex Learning Solutions - [Link]
DAYS SPENT IN UK

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

EXAMPLE 1

n s
◼ James spent 40 days in the UK during the tax year 2019/20. He had not
t i o previously been resident in the UK. James
did not work during 2019/20.
o lu
g S
n in
◼ Solution - James is arriving in the UK. He satisfies a r of the automatic overseas tests since he spent less than
one
46 days in the UK in 2019/20 and was not residentL e in the UK for any of the previous three tax years. James is
e x
therefore not UK resident for the tax yeart2019/20.
e r
V

Vertex Learning Solutions - [Link]

EXAMPLE 2

n s
◼ Caroline had not previously been resident in the UK before she arrived
t i o on 6 April 2019. She spent 60 days in the
UK during the tax year 2019/20. She did not work during 2019/20.
o luHer only home during 2019/20 is in the UK.
g S
n in
◼ a r satisfy any of the automatic overseas tests since she
Solution: Caroline is arriving in the UK. She does not
spends 46 days or more in the UK and does notLworke overseas. She satisfies one of the automatic UK tests since
t e x
her only home is in the UK. Caroline is therefore UK resident for the tax year 2019/20.
r
Ve

Vertex Learning Solutions - [Link]

TAX CONSEQUENCES OF RESIDENCE

n s
◼ An individual who is UK resident is taxed on worldwide income u t io
o l
g S
in
◼ Generally, a UK resident is liable to UK income tax on their UK and overseas income whereas a
n
non-UK resident is liable to UK income taxeonly
r
a on income arising in the UK. We deal with the capital
x
gains tax consequences later in this Study Text. L
r te
Ve

Vertex Learning Solutions - [Link]

COMPUTING TAXABLE INCOME

n s
t io
◼ In a personal income tax computation, we bring together, for each tax year, income from all sources, splitting the
u
sources into non-savings, savings and dividend income. o l
g S
n in
◼
r
a runs from 6 April to 5 April. For example, the tax year
e
The tax year, or fiscal year, or year of assessment
L
x
2024/25 runs from 6 April 2024 to 5 April 2025.
te
r
Ve

Vertex Learning Solutions - [Link]

 n s
u t io
o l
S
◼ Total income is all income subject to income tax. Each of the amounts which make up total income is called a
g
component. Net income is total income after qualifyingininterest and trade losses. Taxable income is net
r n
income less the personal allowance.
e a
x L
rte
Ve

Vertex Learning Solutions - [Link]

THE COMPLETE PROFORMA FOR COMPUTING TAXABLE INCOME

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

CLASSIFICATION OF INCOME

All income received must be classified according to the nature of the income. This is because different
computational rules apply to different types of income. Income can then be further classified as nonsavings, savings or
dividend income. The main types of income are: ns i o
lu t
1. Income from employment (employment income, non-savings income)
S o
2. Pension income (non-savings income)
in g
3. r n
Profits of trades, professions and vocations (tradingaincome, non-savings income)
e
L income, non-savings income)
4. Income from property letting (property business
te x
r
5. Interest income (savings income)
Ve
6. Dividends (dividend income)

Vertex Learning Solutions - [Link]

NON-SAVINGS INCOME

n s
io t
◼ The rules for computing employment income, trading income and property business income will be
u
covered in later chapters. These types of income are non-savings
l
o income. Pension income is also non-savings
Income g S
n i n
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

SAVINGS INCOME

◼ Savings income is interest. Interest is paid on bank and building society accounts, most National Savings &
s
Investments (NS&I) products (eg Direct Saver Account, Investment Account), on government securities (gilts)
such as treasury stock, and on company loan stock. it on
o lu
g S
n i n
◼ Certain types of savings income are paid after deduction of basic rate tax (paid net) but these are not
examinable in Taxation (TX – UK). a r
e
L
te x
◼
r
All savings income in Taxation (TXe– UK) is paid without deduction of basic rate tax (paid gross). This
V
includes interest paid on bank and building society accounts.

Vertex Learning Solutions - [Link]

TAX EXEMPT INCOME

n s
u t io
o l
g S
◼ Income from certain investments, such as those held in individual savings accounts (ISAs), is exempt from income
in
rn tax from investments
tax. They are therefore useful for tax planning to minimise
a
L e
e x
rt
Ve

Vertex Learning Solutions - [Link]

INDIVIDUAL SAVINGS ACCOUNTS (ISA’S)

ISAs are tax efficient savings accounts. There are two types of ISA.
A. Cash ISA (which only has a cash component)
n s
B. i
Stocks and shares ISA (which primarily has a stocks and shares component,
t o although cash may be held in a stocks
and shares ISA if the provider allows this)
o lu
g S
n in
◼ The annual subscription limit for ISAs is £20,000 a r tax year (2024/25). This can be invested in cash, stocks
per
and shares, or any combination of the two. L e
e x
e rt
◼
V
An individual can withdraw money from a flexible cash ISA and replace it in the same tax year
without the replaced cash counting towards the ISA subscription limit.

Vertex Learning Solutions - [Link]

◼ Dividend income and interest received from ISAs is exempt from income tax, whether it is paid out to
the investor or retained and reinvested within the ISA. n s
t io
◼ Similarly, capital gains made within a ISA are exempt from capital gains tax. The introduction of the
u
o l
S
savings income nil rate band and the dividend nil rate band (see later in this chapter) means that ISAs are not as
advantageous as they were previously.
n ing
◼ However, additional rate taxpayers and individuals r
a who have already used their savings income nil
band will still benefit from using a cash ISA. L e
x
teshares ISA is the capital gains tax exemption where an
◼ The main benefit of using a stocks and e r
V
individual already uses the annual exempt amount (see later in this Study Text).

Vertex Learning Solutions - [Link]

SAVINGS CERTIFICATES & PREMIUM BONDS - EXEMPT

n s
◼ Savings certificates are issued by National Savings and Investments (NS&I). They may be fixed rate certificates or
u io
tOn maturity the profit is tax exempt. This
l
index linked and are for fixed terms of between two and five years.
profit is often called interest So
g
n i n
a r
◼ e are exempt from tax.
Premium bonds - Prizes received from premiumLbonds
e x
e rt
V

Vertex Learning Solutions - [Link]

QUALIFYING INTEREST

Qualifying interest is given tax relief by being deducted from total income to compute net income
◼ (a) Loan to buy plant or machinery for partnership use. Interest is allowed for three years from the end of the tax
n s
year in which the loan was taken out. If the plant or machinery is used partly for private use, the allowable interest is
apportioned. io
u t
◼
l
o is allowed for three years from the end of the tax
(b) Loan to buy plant or machinery for employment use. Interest
year in which the loan was taken out. If the plant or machinery g
S
is used partly for private use, the allowable interest is
apportioned. n i n
◼ (c) Loan to buy interest in employee-controlledecompany. ar The company must be an unquoted trading company
L
resident in the UK with at least 50% of the votingxshares held by employees.
◼ rte
(d) Loan to invest in a partnership. Theeinvestment may be a share in the partnership or a contribution to the
V
partnership of capital or a loan to the partnership. The individual must be a partner (other than a limited partner) and relief
ceases when they cease to be a partner.
◼ (e) Loan to invest in a co-operative. The investment may be shares or a loan. The individual must spend the greater
Vertexpart
Learningof their
Solutions time working for the co-operative.
- [Link]
QUALIFYING INTEREST

n s
◼ An individual who pays interest on a loan in a tax year is entitled
t i o to relief in that tax year if the loan
is for one of the following purposes:
o lu
g S
n in
◼ a
Tax relief is given by deducting the interest from r total income to calculate net income for the tax
L
year in which the interest is paid. For Taxatione (TX – UK) purposes it is deducted from non-savings
income first, then from savings income t e x
and lastly from dividend income.
r
Ve

Vertex Learning Solutions - [Link]

PERSONAL ALLOWANCE (PA)

◼ All individuals are entitled to a personal allowance (PA). It is deducted from net income, first against non savings
income, then against savings income and lastly against dividend income.
n s
io
u t
◼ o l
All individuals (including children) are entitled to a PA of £12,570.
g S
n i n
◼ However, if the individual's adjusted net income r
a exceeds £100,000, the PA is reduced by £1 for each £2
by which adjusted net income exceeds £100,000 L e until the PA is nil (which is when adjusted net
te x
income is £125,140 or more). r
Ve
◼ Adjusted net income is net income less the gross amounts of personal pension contributions and gift aid
donations.

Vertex Learning Solutions - [Link]

QUESTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

SOLUTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

WORKINGS FOR PA

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

COMPUTING INCOME TAX LIABILITY AND INCOME TAX
PAYABLE

1. To work out the income tax liability on the taxable income, first compute s the tax on non-savings income, then
on savings income and, finally, on dividend income. it on
2. Tax reducers reduce tax on income at a set rate of relief. o lu
S
gEarn (PAYE). If tax deducted under PAYE exceeds the
3. i
To work out tax payable, deduct tax paid under Pay As You
n n
tax liability, the excess will be repayable. a r
L e
4.
te x
The income tax liability is the amount of tax charged on the individual's taxable income.
5.
r
Income tax payable is the balance ofethe income tax liability still to be settled in cash
V

Vertex Learning Solutions - [Link]

COMPUTATIONS WITH NON-SAVINGS INCOME ONLY

Taxpayers with non-savings income only may pay income tax at basic rate, higher rate and additional
rate.

n s
◼ Basic rate on non-savings income - io
u t
The basic rate of tax on non-savings income is 20% for 2024/25o
l
The basic rate limit for 2024/25 is £37,700.
g S
n i n
◼ Higher rate on non-savings income a r
The higher rate of tax on non-savings income is L
e
40% for 2024/25. The higher rate limit for 2024/25 is
£125,140. te x
r
Ve
▪ Additional rate on non-savings income
The additional rate of tax on non-savings income is 45% for 2024/25. This rate applies to non-savings
income
Vertex in excess
Learning Solutions of the higher rate limit which is £125,140 in 2024/25.
- [Link]
COMPUTATIONS WITH NON-SAVINGS INCOME AND SAVINGS
INCOME ONLY

Savings income starting rate

n s
◼ There is a tax rate of 0% for savings income up to £5,000 (the t i osavings income starting rate limit). This
rate is called the savings income starting rate. The savingsoincomelu starting rate only applies where
the savings income falls wholly or partly below the g S rate limit.
starting
n in
a r
◼ Remember that income tax is charged first L eon non-savings income. So, in most cases, an individual's
t e x
r
non-savings income will exceed the savings income starting rate limit and the savings income starting rate will not
be available on savings income Ve

Vertex Learning Solutions - [Link]

COMPUTATIONS WITH NON-SAVINGS INCOME AND SAVINGS
INCOME ONLY

n s
u t io
o l
Savings income basic, higher and additional rates
g S
◼ n in The higher rate of tax for savings income is 40%
The basic rate of tax for savings income is 20% for 2024/25.
for 2024/25. The additional rate of tax for savingsa rincome is 45% for 2024/25..
L e
e x
e rt
V

Vertex Learning Solutions - [Link]

COMPUTATIONS WITH NON-SAVINGS INCOME AND SAVINGS
INCOME ONLY

Savings income nil rate band

n s
io t
◼ There is a tax rate of 0% for savings income within the savings income nil rate band. The savings income
u
l
o taxpayer and £500 if the individual is a
nil rate band for 2024/25 is £1,000 if the individual is a basicSrate
higher rate taxpayer.
i n g
◼ r n rate taxpayers.
a
There is no savings income nil rate band for additional
e
x L
rte
◼ The savings income nil rate band counts
Ve towards the basic rate limit of £37,700.

Vertex Learning Solutions - [Link]

COMPUTATIONS WITH NON-SAVINGS, SAVINGS AND DIVIDEND
INCOME

n s
u t io
Dividend income basic, higher and additional rates
o l
◼ The basic rate of tax for dividend income is 8.75%. g S
n in
◼ The higher rate of tax for dividend income is 33.75%.
a r
◼ The additional rate of tax for dividend income is 39.35%. L e
te x
r
Ve

Vertex Learning Solutions - [Link]

COMPUTATIONS WITH NON-SAVINGS, SAVINGS AND DIVIDEND
INCOME

n s
Dividend nil rate band
u t io
o l
◼ There is a tax rate of 0% for dividend income within the dividend nil rate band.
S
◼ in g
The dividend nil rate band is £1,000 for all taxpayers.
r n
◼ The dividend nil rate band counts towards the
a
ebasic rate limit of £37,700 and the higher rate limit of
x L
£125,140.
rt e
V e

Vertex Learning Solutions - [Link]

TAX RATES

NSI SI DI

n s
Basic rate £1 to £37,700 20%tio 0%*, 20% 8.75%
o lu
Higher rate
S
£37,701 to £125,140ng 40% 40% 33.75%
ni r
Additional rate £125,141 andLover e a 45% 45% 39.35%
t e x
e r
*Savings income nil rate band £1,000
V
- Basic rate taxpayers £500
- Higher rate taxpayers $0
Dividend nil rate band £1,000
 TAX REDUCERS

Tax reducers do not affect income; they reduce tax on income. The relevant tax reducers for Taxation (TX
– UK) are: ns i o
lu t
S o
A. Transferable PA (marriage allowance). This is dealt with glater in this chapter.
n i n
B. Property business finance costs. This is dealt with
a r later in this Study Text.
L e
e x
e
Tax reducers are deducted in computing rt an individual's income tax liability. The tax liability can only
V create a repayment.
be reduced to zero; a tax reducer cannot

Vertex Learning Solutions - [Link]

STEPS IN COMPUTING THE INCOME TAX LIABILITY AND INCOME
TAX PAYABLE
The first step in preparing a personal tax computation is to set up three columns.
1. Deal with non-savings income first
2. Now deal with savings income
n s
3. Lastly, tax dividend income
u t io
o l
4. Add the amounts of tax together.
g S
n in
a r
a)
L e
Once tax has been computed, deduct any available tax reducers
b) te x
Calculate the amount of any child benefit income tax charge and pension annual allowance charge, add to the
r
tax remaining after step 6.
Ve
c) The resulting figure is the income tax liability.
d) Deduct tax paid under PAYE.
Vertex Learning Solutions - [Link]
CALCULATING ADDITIONAL TAX DUE

n s
◼ Calculating additional tax due, for example when a new source of income
t i o is acquired, can often be done by
working at the margin.
o lu
g S
n in
◼ Often a taxpayer is interested in looking at the a r after tax return from a particular investment or
transaction. In each of the following examples L e will calculate the additional tax due as a result of
we
e x
acquiring a new source of income
e rt
V

Vertex Learning Solutions - [Link]

CALCULATING ADDITIONAL TAX DUE

s
◼ Often a taxpayer is interested in looking at the after tax return from a particular investment or
n
transaction. In each of the following examples we will calculateuthe io
t additional tax due as a result of
acquiring a new source of income. This is sometimes called
l
o'working at the margin' as it relates to the
S
marginal rate of tax which is the rate that the taxpayer hasgto pay on each additional pound of income received.
n in
ar
L e
◼ Note how it is not necessary here to use the full income tax proforma and therefore is a useful way
x
of saving time in the exam. rt e
Ve

Vertex Learning Solutions - [Link]

EXAMPLE 1

n s
t io
◼ Kate has employment income each tax year of £70,000. Her grandfather dies leaving her a number of houses
u
o l
S
which are rented out to tenants. She has property business income of £30,000 during 2022/23. Kate's
g rate band of £37,700 (total £50,270) so the
employment income uses up her PA of £12,570 and the ibasicn
rnbusiness income can be calculated simply as
additional tax due as a result of receiving the property
a
£30,000 * 40% = £12,000. L e
e x
rt
Ve

Vertex Learning Solutions - [Link]

ACCRUED INCOME SCHEME

n s
u t io
o l
g S
◼ The accrued income scheme ensures that a taxpayer who sells a gilt is taxed on any interest income included in
the proceeds. Similarly, relief is given to the purchaserrn in
of the gilt for the interest included in the price paid.
e a
x L
rt e
Ve

Vertex Learning Solutions - [Link]

QUESTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

SOLUTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

ACCRUED INCOME SCHEME

n s
iot
◼ The accrued income scheme ensures that a taxpayer who sells a gilt is taxed on any interest income included in
u
the proceeds. Similarly, relief is given to the purchaser of the gilt
l
ofor the interest included in the price paid.
g S
n i n
◼
r
a the seller holds securities with a nominal value
The accrued income scheme only applies where e
Lthe interest period ends.
exceeding £5,000 during the tax year in which
te x
r
Ve

Vertex Learning Solutions - [Link]

HOW THE ACCRUED INCOME SCHEME WORKS

s
◼ Under the accrued income scheme, where gilts are transferred at a price which includes interest, the
n
u t
accrued interest reflected in the value of gilts is taxed as savings io
income on the seller. This is because
l
o which has accrued since the last
the seller is treated as entitled to the proportion of interest
interest payment. g S
n in
ar
L e
◼ The buyer is entitled to relief against the interest they receive equal to the amount taxable on the
x
seller. rt e
Ve

Vertex Learning Solutions - [Link]

GIFT AID

◼ Gift aid n s
Increase the basic rate limit and the higher rate limit by the gross uio
t
amount of any gift aid payment to give tax relief
l
at the higher and additional rates.
gSo
n i n
◼ Gift aid donations a r
e
L for tax relief under the gift aid scheme provided the donor
One-off and regular charitable gifts of money xqualify
gives the charity a gift aid declaration. rte
Ve

Vertex Learning Solutions - [Link]

TAX RELIEF FOR GIFT AID DONATIONS

n s
t io
◼ A gift aid donation is treated as though it is paid net of basic rate tax (20%)
u
o l
g S
◼ n
This gives basic rate tax relief when the payment is [Link] example, if the taxpayer wants the charity to
receive a donation of £1,000, they would only need a
tor make a payment to the charity of £800. The charity
reclaims the 20% tax relief that the taxpayer hasL e
received, resulting in a gross gift of £1,000.
te x
r
Ve

Vertex Learning Solutions - [Link]

QUESTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

SOLUTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

WORKINGS

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

ADJUSTED NET INCOME

n s
t io
◼ Adjusted net income is net income less the gross amounts of personal pension contributions and gift aid
u
donations. o l
g S
nin
◼
r
a charge are calculated in relation to adjusted net
The restrictions on the PA and child benefitetax
income. x L
rte
Ve

Vertex Learning Solutions - [Link]

ADJUSTED NET INCOME

s
◼ Where an individual has an adjusted net income between £100,000 and £125,140, the effective rate
n
of tax on the income between these two amounts will usually io
u t be 60%. This is calculated as 40% (the
higher rate on income) plus 40% of half (i.e 20%) of the excess
l
oadjusted net income over £100,000 used to
restrict the PA. g S
n in
a r
L e
◼ The individual should consider making personal pension contributions and/or gift aid donations to
x
e
reduce adjusted net income to belowrt£100,000.
Ve

Vertex Learning Solutions - [Link]

CHILD BENEFIT

n s
◼ Child benefit is a benefit paid to people responsible for caring
t i o for at least one child. It is usually paid
to the mother of the child.
o lu
g S
n in
◼ Child benefit is usually exempt from income a r However, an income tax charge applies if a taxpayer
tax.
receives child benefit (or their partner receives L e benefit) and has adjusted net income over £50,000 in a
child
e x
e rt
tax year. This charge is covered later in this chapter.
V

Vertex Learning Solutions - [Link]

CHILD BENEFIT INCOME TAX CHARGE

n s
tio
◼ An income tax charge applies if a taxpayer receives child benefit (or their partner receives child benefit) and
u
the taxpayer has adjusted net income over £50,000 in a tax
l
o year. Adjusted net income is defined in
the same way as for the restriction of the PA described
S
g earlier in this chapter. The effect of the charge is to
recover child benefit from taxpayers who have higherrn i n
incomes.
e a
x L
◼ rtean unmarried partner where the couple are living together as
A 'partner' is a spouse, a civil partner, or
though they were married or were Vecivil partners.

Vertex Learning Solutions - [Link]

CHILD BENEFIT INCOME TAX CHARGE

◼ If the taxpayer has adjusted net income over £80,000, the charge is equal to the full amount of child
benefit received n s
u t io
o l
S
◼ If the taxpayer has adjusted net income between £60,000 and £80,000, the charge is 1% of the child
g
nin
benefit amount for each £200 of adjusted net income in excess of £60,000. The calculation, at all
a r
stages, is rounded down to the nearest wholeenumber.
x L
rte
◼ e
If both partners have adjusted netVincome in excess of £60,000, the partner with the higher adjusted
net income is liable for the charge.

Vertex Learning Solutions - [Link]

QUESTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

SOLUTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

TRANSFERABLE PERSONAL ALLOWANCE

n s
◼ An individual is permitted to transfer £1,260 of their PA to their spouse/civil partner, in certain circumstances,
u t io
giving a tax reducer of £252.
o l
g S
n in
◼ Conditions
a r
Neither the spouse/civil partner making the L
e
transfer nor the spouse/civil partner receiving the
x
rte rate taxpayer.
transfer can be a higher rate or additional
Ve

Vertex Learning Solutions - [Link]

TRANSFERABLE PERSONAL ALLOWANCE-

n s
Method of giving relief u t io
o l
S
◼ The spouse/civil partner receiving the transfer does not have an increased PA.
g
in
◼ Instead, they are entitled to a tax reducer of £1,260 × 20% = £252. The tax reducer reduces the
n
r
aliability of less than £252, the tax reducer reduces the tax
e
individual's tax liability. If the individual has a tax
L
liability to nil.
te x
r
Ve

Vertex Learning Solutions - [Link]

QUESTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

SOLUTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]

SOLUTION

n s
u t io
o l
g S
n in
a r
L e
te x
r
Ve

Vertex Learning Solutions - [Link]