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 individual tax · Employment Income 30,000

earned
by during · Employment Income 40,000 L

year
an a
-

= -
- -

· Trading Income 20,000 - · Property Income 35,000 2

divided in three heads tax purposes.
- - -
-
for · Property Income 10,000 -
are
- - - · Trading Income 9,000
-
=

1 incomes Normal
Saving
Non > incomes
Compute Tax Payable? Compute Tax Payable?
Income Fax Return
-

2
Saving income > interest income Non
Saving
3) Dividend income >
Profit Distribution
from Companies -

Employment
30 , 000 Income Tax Return Non
Saving
Tax Return Dividend
Trading 20
Employment 40
Non
Saving Saving 000 000
-
-

.
,

Employment income XXX

Property 10 000
Property 35 000
>
-
= ·
- ·
,
,

Total 60 000 9
-

Trading income XXX -

income . -

Trading ,
000

Property income X XX - -

Personal allowance (12 .570) Total income 84 ,

000

-
REIT income XXX - -
Taxable income 47 4302 , Personal allowance (12 570) ,

- Trust income XXX

-
XXX
Tax -
377 700 X 20 % =
7540 laxable income 71 430 ,

Pension income XXX 9730 X 40 % =

3892 T 37 700 X 20 % 7540
&X
-
- - -
I
,

-
Interest income -
XXX =
47 430
,
11 432
.
33 730 , X 40% = 13 492
,

-
Dividend income - -
XXX 71 430 ,
21 032
,

-
Total income X XX XXXXXX Practice Question No. 2:
-

Personal Allowance (12 570)

, (xXx) (XXX) Mr. A has following incomes for the year: Real Estate Investment Trust (REIT)
-
=

Taxable -
REIT
fund
income XXX XXX XXX
mutral investment
· Employment Income 50,000 which raises
from
-
-

is a
- -

· Property Income 25,000 -

Tax Rates Nis
public and then invests it in Real Estate OR Property
-

Trading Income 5,000 ~

- -

· = -

~
Basic rate band = 1 37 700 20 %
market
Compute Tax Payable?
,
,

rate band 40 % REIT &

Higher through rental Capital
37 701 125 140 those
gains
earns income
-
= on
-

, ,

Additional rate band 125 141 X 45 % Income Tax Return Non

Saving property. REIT then distributes its income its
among
-
:
,

Employment 50,000
, investors .

Personal allowance = 12 570 ,

-

Property 25 000
5
,
-

An investors
,
invests in REIT rather than
purchasing
real

, 000
trading estate
directly because it reduces risk
-
.

Tax Total 80 000 REIT by experts

year of
UK is income 1 is
managed
-
,

to 5th Personal allowance (12 570) In

gets pooled
-
6th April April , 2
. REIT risk in
multiple properties.
Finance Act <Tax Taxable income 67 430 dividend
filing 6th April individual REIT then
2024 2024
gets from
- =
, When
-
an

7540
5th April 2025
Tax -
37 700 ,
Y 20 % - its taxation issues will be :

29 ,730 40 % 892
Relevant June 11 It taxed
=
X be
for will
1.
exams in 2025
September ,
2025 as a Non
Saving income
-
,
,

67 430 19 432
December 2025 & March 2026 ,
,
2
. It will be taxed in
receipt basis

Tax (24/25) tax is

6 4 2024 5 4 2025
With-holding
3 20 %
)
year
- . .
. .
=

1. 4 . 2024 31 3 2025
. .
> 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

Y
· Trading Income 25,000 Dividend distribution done
income
refers
to
profit by a
-

- -
-
-

· Pension Income 2,000

- - · Pension Income 18,000
Net
- -

wH
· REIT dividend 9,000
- - -
-
= 20 % -
· REIT dividend 6,000 =>
-
-
WHT= 20 % t Net company.
Dividend received individual tax
Compute Tax Payable? Compute Tax Payable? - income
by an
during a

Income Tax Return separate head

Saving classified income
won as
of
is a as
year
Income Tax Return
Trading 52
Saving dividend has tax
000 Non income
separate rates .
-

Pension Bands Dividend

Trading
-
2 ,
000 - 25
,000 Tax N/S
9 000
J
-
REIT =
,
X 100% 11 250 -

Pension 18 000 Basic rate band = 1 3 ,700 20% . 75 %

8
80%
-
,
,

6 000
>
REIT , 500
7 3. 75 %
65 250 X 100%
Higher
,

Total income
-

=
-
rate band = 3740 125 140 40 % 3
80 %
,
,

Personal Allowance (12 570), Total income 50 500 ,

- Additional rate band = 125 141,
X 45% 39 35 %
.

Taxable income 52 680 ,

Personal allowance (12 570) ,

Tax 37 700 X 20 % 7540 Taxable income 37 930 First 500 dividend income taxed at 0% rate.
of
-
-

,
, are

14 980 , X 40% - 5992 Tax -

37 700 ,
Y 20 % = 7540 ->

No WHi on dividend income .

52 680 Tax 13 , 532 230 40% 92

.

Liability Y =

Tax Credit (2250) 37 930,

Tax
Liability 7632

(1500)
Payable
Tax 11 282
,
Tax Credit
Tax
Payable
6132

Practice Question No. 5

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

· Trading Income 14,000

- -

· Pension Income 25,000

=

· =
- -> WHT
REIT dividend 11,000 = 20 % -

Net
Compute Tax Payable?

Income Tax Return Non

Saving
Trading 14, 000

Pension 25 000
.
I

11 000
REIT =
,

X 100% 43,
750
80%

Total income 52 750 ,

Personal allowance (12 570),

Taxable income 40 180 ,

Tax -

37,700 X 20 % - 7540
-

2480
X 40 % > 992

40 180 ,
Tax liability 8532

Tax Credit (2750)

Tax 5782
Payable
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:
-
T - -
= T -
-

- Trading Income of 39,000 - - Trading Income of 27,000 W - 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 - - REIT Dividend 4,000 WHT 20% -
:
> WHT 20%
- -
-
: -
>
-
-

Tax Payable?
- Tax Payable? Tax Payable?
-

Income Tax Return

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

Trading 39,000
Trading
1 27
Employment
12 000
- -

000
- -
-
- .
,

4
Dividend 7 000
Employment Dividend
-
, 000
T
-
#
20 .
000 - >

5 000 S 4
-
Dividend -
10 ,
000 -
REIT ,

80%
X100% 6250 -
REIT :
000
,
x100 % 35 000
,
-

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

Tax
T 30 430
.
30 430
,
x 20% = 6 086 ,
T = 20 680 .
20 680
.
x 20%: 4136 N/S = 4430 4430X20% = 886

Div .
-- 10 000 500 x0 % = 0 Div . - 20 000 500 X0% = 0 Div . = 7 000 500 X 0% = 0
,
, ,

6770 x 8 75 %=
.

592 16 520
,
x 8 75%: 1446
.

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

2730 x 33 75 %:
.
921 2980 x 33 75 %.
= 1 006
, Tax Credit (1 000 ,

7599 Tax 6588 Tax 455

Tax
Liability
Credit (1250) Payable
Payable
Tax 5338
 I
-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:
- - F - -

trustees Property Income of 18,000 -

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

_
- -

Income received from DT 10,000 -

, -

- Income=>received from DT 9,000 wh 45 % =

-
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 Non
Saving Dividend Income Tax Return Non
Saving Dividend
manage
Income to be
systematic Trading 9 Hood
Property 18 000
-

2
. is
&

given
-

in manner -

000 & 10 ,000 S

tax DT X 100% 16 364 DT = X 100% 18 182
,

. Trust
3 created
- &

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 25 000 Total 36 182

can be
during life OR at time
of
death income income 20 000
-
, .
,
.
,

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

Trust can be created
of
two
types
,
:
-
,

Taxable income 20 794 25 000 Taxable income 23 612 20 000

↓
Discretionary Trust , .
.
.

2
. Interest in Possesion Trust .
Tax
=
T
Trust N/s 20 794 20 ,794 4159 N/S 4722
Discretionary 23 612 23 612
= . X 20% = = x 20 %=
.
.

Trust (DT) discretion 500 500 O

-

Discretionary operates according to Div . = 25

, 000 X 0% = 0
Div .: 20 , 000 X 0% =

decisions
16 , 406 X 8 75%:
.

1436 13 588 x 8 75%:

.

1189
trustees Trustees can take all ,

of .
in

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

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

for
DT tax x
·

planning purpose.
is
.

income
-

Tax 8327 7906

-

Income received
from DT is taxed in
following
manner
liability Tax liability
Tax Credit (7364) Tax Credit (818)
on
beneficary :

Tax Tax Receivable (276)

Payable
1 It taxed 963
will be on
receipt basis

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
-

they have to
followwill
instructions
of
Donor
defined
in Constitution OR
trust dividend
Beneficaries have
defined rights
in IIP and 3 However
i from
- earns

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:
=>
- -
= = -

- -

-
-

- Property Income of 16,500

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

- Income received from DT 10,000 > WHT 45 %

= -

Income received from DT 8,000 > WH 45 %.

45%
-

- Income received from DT 8,000

~ WHT =
- - :

--
-
- = -
-

-
-
-

-
- Dividend Income 7,000 -
= -

Income received from IIP 5,000 > I > WHT 28% - Income received from IIP 8,000-
(earned from dividend source)
-
- - :
> 75%
-

wH 8
- Income received from REIT 6,000
.

-
- =
-

Tax Payable? - Dividend Income 18,000 - --

-

=
-

-- Dividend Income 11,000 =

WHT
20 % -

Tax Payable?
Tax Payable?
Income Tax Return Non
Saving
Dividend Iome Tax Return Non
Saving Dividend
-

6 500 Income Return

Employment Dividend
Tax
Property 8 16 500
Saving
=

,
-
, Non
J 8000
-14 545
000
14 545
Trading
X 100 %
DT X 100% DT 30 000
, -
- T
-
=
55% ,
=
55 % ,
.

5 S 10 , 000
Dividend 7
. 000 IIP 000 100% 6250 Di
J
18 182
-

. X
-
=
- *

X 100 %
>
-

55 % ,

8 000 >
Total income 3
,045 7
. 000 -

Dividend F
18 ,
000 IIP ,

91 25 %
x 100%
.
-
8767
>
Personal allowance (2 570)
, Total income 27 295 ,
18 000
, REIT 6
, 000 X 100% 7500 T

80%
Taxable income
18 475 ,
7 000
,
Personal allowance (12 570) , Dividend -
11 ,
000

Tax N/s = 18 475,

18 475
,
x 20% =
3695 Taxable income 14 725
,
18 ,000 Total income 55 682 .
19 767 .

(12 570)
-14725
Div .
: 7 000
,
500 X 0% = O Personal allowance .

6500 x 8 75% :
.
569 14. 725 x 20 % - 2945 Taxable income 43 112 , 19767

Tax 4264 18 000 500 x 0% O

Tax
liability Div =
.
=
,

Tax Credit (6545) 17 500

,
x 8 75 %
.
=
1531 N/s : 43 ,
112 37, 100 X 20% = 7540

Tax Receivable (228) Tax Liability 4476 5412x 40%: 2165

Tax Credit (655) Div : 19767 500 X 0% = O

Tax Receivable (3319) 19 267

.
x 3375% : 6503

Tax Liability 16 208

,

8182

(C
Tax Credit 767
1500

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

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

F -
-
-
=> -

~
-
-
Employment Income of 22,500
-

Income received from DT 12,000 > WHT 45%

-

-
=
tax
year
is
classified
in head
ofSaving
income . - -Employment Income of 23,000
-~ Income from DT of 7,000 WHi 45
=
%
-

-
=

Tax
-

ofSaving
=
-

- Income received from IIP 14,000 > NIS WHT 20 % rates

=>

incomes are :
--
Y
WHT 8 75 %
: -

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

=
-
.

- --
- -

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

- Income from Bank Interest is 14,500

- -

WHi 8 75 %
700 E Saving
: .
-- >
-

- Dividend Income 25,000

-

~ ~
- Dividend Income 13,500
Rate band .75 %
8
-

Basic
-

1
-

-
= 37 ,

Tax Payable? Tax Payable?

40 %
-

Rate band 125 140 40% 3. 75 %

3 -

Higher 37 70
-
: ,
,

Income Tax Return

Saving Dividend Additional Rate band 45 % 45% 39 Income Tax Return
Saving
Non 125 141 35 %
& Non
Saving Dividend
.
-
:
,

Employment
22 500
Employment 23, 000
* >
- *
-
,

12 000 > , 7 000 S

DT X 100% 818 In rate band
,

tax 12 . 127
Saving
21 O% DT
- -
is available x100%
F

55 % income
-

55 %
-
= , =

14 000
IIP
,

X 100%
>
17 500 &

IIP
7500
x 100 % 58219
8:
80 % 91.25 %
-

, - = -

6 000 36575
IIP X 100 % El tax Bank interest 14 500
if
basic rate
payer
, - -

a
person
=
000 is
9 1. 25%
- - -

, ,

Dividend 25
#500 rate tax Dividend 13 500
higher
is
person payer
000
- - -

if
a
-
-
, ,

Total 61 818 31 575 to additional rate tax Total income 35 727 14 500 21 ,719
if person payer
income , ,
-

a is , ,

Personal allowance (12 .570) Additional % band Personal allowance (12 570)
for saving
-
0 is availatule income ,

Taxable 49 ,248 31 575

Taxable 23 157 14 500 21 . 719

first
lies 5 taxable income + +
I saving
income income in
of
,
000 , ,
,

376-igher
TaX income . This 0% band is available on initial [5, 000 = 59 .
e

T
NIS 49 348 37 700 it to
taxable
Saving
20 % 7540 relates
if
X

of
=
, , income income .

11 548 X 40 % 4619 Interest taxed 23 157 23 157 20 % 4631

receipt
=

income is basis = X =
on
-
, . ,

500 X % 0
Interest 500 0
and
Saving 14 500
Div 31 575 National 0%
Saving certificates
=

income X =

from
-
. = , -
,

31 075 X 33 75 % 10 488 tax. 14, 000 20% 2800

Individual
Saving
=

Account income X
.

exempt from
=
, , is

Tax 0% 0
liability 22 647 There investment limit
Saving Dividend 21 719 500 X =
,
·
is no in National =
,

9818
Tax Credit 38 157
3500

575
Certificate ,

33 75 %: T161
-
However in ISA maximum investment is 20 ,
000 . 21 ,
219 x ·

Tax
Payable
8754
- There
Normally
is no WH on interest income. However Tax liability 14 592
,

unlisted loan Tax Credit (57927)

interest
from company notes
is ,
I
income

Payable
then 20 % WHT will Tax 8146
apply.
 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

- - -

- -

-~Pension Income of 16,500 - ~ Property Income of 27,000 -

- Income from DT of 5,000 > WHI 45% -
=

Income from IIP of 18,000 - W20

- -

%
-

WH45
- - Interest Income from National Saving Certificate 6,000
-
>
-

↑
- Income from DT of 9,000- -
-
= -
- -

=> - Bank Interest 29,000 - Bank Interest 32,000

-

- Trading Income 15,500 - = -

=

-~
=

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

- Dividend Income 19,000
- -

=>
- Dividend Income 10,000 Tax Payable? Tax Payable?
#come
-

Tax Payable? Tax Return

- Non
Saving Saving Dividend
Income Tax Return
Income Tax Return Non
Saving Saving Dividend Property
,8
27, 000 Non
Saving Saving Dividend
- - -

>
- Pension 16 500
, IIP
-

.000
= x 10. 22 500 ,
3
-

Pension 17, 000 - -

9 >16 364 , 000

5 >
-
DT = 000x100
, ,
T
-

-
Bank interest & 29 ,000 -

·
DT =
55 %
X100 % 9 091
,
3
*

Dividend Sav . Cert

Trading Too
-
15 500
,
-
-
- - -

-
National .
- & -

Bank interest =
16 500
,
-
Total income 49 500
,
29, 000 T, 000 -
Bank interest -
32,000 -

Dividend &
>
-

10 , 000 Personal allowance (12 570) ,

-

Dividend - -
19 ,000

Total income 48 36416 500

, ,
10 000
, Taxable income 36 930, + 29 000,
+ 7 000
,
Total income 26 091 ,
32 , 000 19 ,
000

Personal allowance (12 570) 72 ,930 h Personal (12 570)

> allowance
-
=
.
,

Taxable income 35 794 + ,

16 500 ,
+ 10 000
,
Tax Taxable income 13 521 ,
+ 32, 000 + 19 . 000
W

her
62 294 N/S 36 930 36 930 20% 7386 64 521
higher
= = , ,
X =
= -
, .

Is
Sav 29 0

Tals
=
,
000 500 X 0% =

=
35 794 , 35794 x 20 % =
7159 270 X 20 %: 54 :
13 521
.
B 521 .
x 20 % : 2704
500 37,700-
Saving
0 0% O
16 500 X0 % Sav 32 500 X
,
= =
:
= ,
000
,

1406 X 28 40 %: 11 292 23 , 679x20 % 4736

20 % =
281 ,
230 x .
=

37700 7 000 500 0% O 37 700

, Div =
,
X =
,

14 594 x 40% = 5838 6500 x 33 75%

.
=
2194 7821 x 40% =
3128
,

500 O
Dividend : 10 000 ,
X0 % = 0 Tax Liability 20 926 , Div .
= 19 ,
000 500 X 0 % =

9500 x 33 75%: .

3206 Tax Credit (4500) 18 500 .

x 33 75%= .

6244
Tax
Liability
16 484
, Tax
Payable
16 426
, Tax liability 16 ,812

Tax Credit (736) Tax Credit (409)

9120
Tax
Payable Tax
Payable 12 721
,
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: = - -
-
an individual takes a loar purpa

=
-
-

- -Trading Income 7,000 -~Employment Income 4,000 then interest

. expense on

O-N . - from REIT 3,000 (gross) wh20 % -3000x201

000x
WHT 20 % - 2 - Income
- - ↑

- Income from IIP of 2,000 (gross) -

= ,

deductable total
-
= -
-
- Interest Income 30,000 from unlisted company loan notes. income
- -Interest Income from Individual Saving Account 3,000
from
.

-M
- - - -
-

-~ Dividend Income 12,000

-

20%
- -Interest income from unlisted company loan notes 25,000 If loan in
not loan its
a a
qualifying then
-

- - -
- >

- Dividend Income 19,000 WHT 20 /

Tax Payable? deductable
against
-

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

Income Tax Return

Employment
Saving Dividend
4, 000 include:
Non
Saving Qualifying purposes
-
-

REIT 3
, 000
Trading Too Loan taken to share
partnership
-

↓ purchase in
-
-
-

lIP 2
, 000 Interest income
from firme
-
2
-

>
Individual Sav Al unlisted Co 30.000 x 100% 37 500 taken to &
2 Loan
purchase plant machinery
T -
- & T
-
. .

,
,

Interest Dividend 12 000

partner OR
income
from by behalf
of
their
firm
- = =>

a
-
,
on
, 000
25 >
unlisted .
t x100 % - 31 250 Total 7 37 500 12 shareholder
company
income
behalf
by
000
000
their
-

of
80% , ,
, ,

a on

Dividend 19 Personal allowance (700d (5570) employment.

by
-

employee for
000 in
-

O
-

,
an use

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

is available
relief
income 000 t 000
expense
. ,
, , ,

Personal allowance (9 000) (3570) 43 930-

Higher for the
first four years
.
=

only
, ,

27610
Taxable income T
+ 3 Loan taken to invest shares
of
, in a

close
trading
Company
Saving 31 930
employee-owned
, 000 O

t
5 0% 4 Loan taken to invest
=
, X =
in an

O 500 X 0% - O
Company.
,000 5286
Saving
: 27 680
,
5 X 0% = 0 26 , 430 x 20 % =

%
500 X % = 0
Dividend : 12 ,
000 500 X 0 = O

22 , 180 X 20 % =
4436 5270 X 8 75 %
.
=
461

Div .
= 19 , 000 500 X 0% = O 37 700
,

9520 x 8 75%
. =
833 6230x33 ·
75% = 2 , 103

Tax 7850
37 700
,
Liability
8980 x 33 75%
.
= 3 031
, Tax Credit (0
Tax liability 8300 Tax Receivable (250)
Tax Credit (400) 6250

Tax
Payable
1650
Practice Question No. 22: Practice Question No. 23: Practice Question No. 24:
Mr. G has following data for the year: Mr. A has following data for the year: Mr. B has following data for the year:
=
- - - - -
= - -

- Employment Income 18,000

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

-
-
-

-- Interest Income Bank 22,000 --Interest Income from Un Listed Company loan notes 25,000

-
= - -
- Interest Income from Listed company loan notes 18,000
- Interest Income from National saving Certificates 14,000
-- - -
-~ Interest Income from Individual Saving Account 3,000
z -
- Income from REIT 7,000
-

-~ Dividend Income 12,000 - wDividend Income 16,000 -~ Dividend Income 22,000

O
- -
- -

- Interest Expense paid on loan to acquire Plant for Employment -

--
- Interest Expense paid on loan to invest in close company -
- Interest Expense paid on loan to invest in Partnership business
- - - -

2,900 -
4,000 4,000
- -

Tax Payable? Tax Payable? Tax Payable?

Income
- -

Tax Return Non

Saving Saving Dividend
Dividend
Saving Dividend
18 000 Income Tax Return Saving Income Tax Return
Employment Non Non
Saving Saving
-
-
,

Interest income
-
22 , 000 - -

Trading 19. 000 -

Employment 12 ,
000
- -

Sav Cert Interest 18 000

-Interestincoma
-
National .
&
&
-

income
-

,
&

-
Dividend T
-
12 000,
100%
-

31 250 ,
&
·
REIT -
To X 100% 38750 - =>

total income 18 000 ,

22, 000 12 ,
000
-

Individual Sau . Alc * -

>
-
-

Dividend - -
22 000 ,

Qua loan interest exp (2900) Dividend 16 000 Total

lifying
.
·
& -
,
income 20 750 .
18 000 ,
22, 000

Net 15 100 12 Total 19 000 31 16 , 000 Qua loan interest exp (4 000)
lifying
income 22 , 000 000 250
, , income . ,
.

(12 570) (4 000)

Personal allowance
Qualifying loan interest . Net 16 750 18 , 000
. exp , income 22 , 000
,

Taxable income 2530 + 22 , 000 + 12 , 000 Net income 15 000 ,

31 250
,
16 000
, Personal allowance (12 570) .

Personal allowance (12 570) Taxable 4180 18 000

T2530
= 36 530
,
- Basic ,
income + , + 22 , 000
=

+ 16
2 %% 506 Taxable 2430 + 31 250 44 180
Higher
2530 X
=
income , 000 = >
-

,
- ,

Sav 22 000 2470 0% O 49 680- T

Higher
. -
,
X =
=
,

5 ,
000
T N13 : 4180 4180 X 20 % = 836

1 % O 820 0%
N/S 486
Saving
, 000 X 0 =
: 2430 2430 X 20 % - = 18 . 000 X =
O

18 530 x 20 % = 3706 Sau =

31 250
,
2570
X 0% =
O 5 ,
000
,

12 500 0% O , 000
5 500 0 % O
Div X X
= =

.: ,
000

11 500 , x 8 75%
.

= 1, 006 500 X 0 % =
0 16 680 x 20 % =
3 , 336
,

500 8
5218 28 180
,
X 20 % =
5636 Dividend = 22 , 000 X 0% =

Div . = 16 000 500 X 0% =

O 15 020 , X 8 75 % .
= 1314
,

3520 X 8 75 %
.
= 308 37 700 ,

37,700 6480 x 33 75%: .

2187

11 980
,
x 3375% = 4 043
, Tax Liability 7673

Tax liability 10 473

.
Tax Credit (750)
Tax Credit (6250) 5923
Tax
Payable
Tax
Payable 4223
 Practice Question No. 25: Practice Question No. 26: -
Basic Income Tax Calculation Mr. K has following incomes for the year:
2 - - -
Mr. B has following incomes for the year:
= - -
-

~ BasicFormat tax return V Dividend - Employment Income 6,000 - Trading Income 7,500
of
-

- - =
-

- Interest from Bank Loan 7,500 - Interest from Bank Loan 8,000
Trust
Saving No
- -

income
-

W Non income
-

- Dividend Income 35,000

- - -
- Dividend Income 15,000
- -

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

Tax
W
year
W
Qualifying loan interest
-

Planning of Income Tax Return

Saving Income Tax Return Saving Dividend
W REIT Personal Non
Saving Dividend Non
Saving
-
-

Employment 6 7 500
allowance
Trading
- -

000 :
-

,
000 -
,

Interest 7 500 Interest :

Qualifying Donation income
=>
T & -
- ·
,

Dividend 35 000 Dividend 15 000

Planning of Personal Allowance - - -
- -
,
- ,

Total 48 500 6 000 7 500 ,000 Total 7 500 8 000 15

Personal allowance used income 35 30 500 000

first
is income
against Saving
-
Non
, ,
,
,
,
, ,

Personal allowance (12 570) (6 000) (1500) (5070) Personal allowance (12 570) (7500 (2 000) (3070)
income it has
highest tax rates. ,
as , , ,

Then PA used Taxable income 35 930 Or 6 000 29 930 Taxable income 17 930 W 6 000 11 930
against Saving
N/s
after
income
-
-
is , ,
,
, , ,

si
,
Y
35 000 + 1 000
incomes as its tax rates are
greater
than Dividend Basic , ,
> 5 000 + 1 000
, ,

T Tax
income.

PA is used Dividend at last as its tax

or Is 0
against
- =

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

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

However it used Div 29 930 500 X 0% 0 Dividend 11 930 500 0% O

that
not
=
is
possible PA is X
- =
= , :
,

29 430 X 8 75 %: 11 430 8 75 %: 1 000

2575
.

saving and tax x

against
.

completely income
payer may
,
, ,

2575 1
decide OR Savinincome
000
to leave some the
of
,

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:
T - -
-

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

it ~
regarded
- Employment Income 6,500 Donation.
charity then
Qualifying
is as

=#
-
- Employment Income 36,000
x1000
-
,
- Interest from Bank Loan 9,000 - Trading Income 10,000
On tax
Qualifying donations
department allows following
-
- -

- Dividend Income 13,000

- -
,
- Qualifying Donation of 12,000
-

reliefs ↓
:
Tax Payable?
- Compute Tax Payable?
Contribution tax
20% is done
by department.
Return extend amount Income Tax Return
Income Tax Saving Saving Dividend Basic Rate band
by gross Saving
Non 2 will .
Non
,

Income
Employment
6 500 36,000
Employment 3, Adjusted Net will reduce
by gross
amount
- -

9 000
Interest Trading 10 000
-
-
-

, ,

Dividend - &
13 000
,
L Total income 46 ,000 >
-
As Net income

Total income 28 5006500 9 000 13 000

If ANI exceeds 100 , 000 then Personal Personal allowance (12 570) is less than
of person
-

,
,
a .
.

Personal (12 57)(6500) (3 000 (3070) E1 Taxable 33. 430 +100 000
diminishes
therefore
income
allowance allowance
by for E2
,

excess.
every
,
,

Taxable income 15 930 or 6

,000 9930 need to
33
,
-
Net income XXX no

sick >
, 000 + 1 000
5 ,
-

gross Qualifying
Donation (xXx)
-
,
43033 430 x 20 %:
,
6 review PA .

(xXX)
T:
Personal Pension Contribution
gross
-

O
Adjusted Net Income XXX

6 (100 000)
Saving. , 000 , 000
5 X 0 % - O limit ,

1 ,
000 X 0% = 0 Excess XXX

Dividend : 9930 500 X 0 % = 0

8 75

25-Persone
9430 Tax Bands
%=
X 12 570
.

allowance ,
~
x (xxx) I 37700 ,
+ 15 000 ,
: 52 , 700

2 O >
-

Maximum 52,701 125 140 + ,

, 000 :
15 140 140
,

140 141,
&

Whenever Net income exceeds 100, 000 PA need to be

,

diminish.
reviewed
for
-
IF ANI is
18140 1 OR more thenP will diminish to

8
ANI = 125
, 140

limit = (100 000)

,

Excess 25 140
,
-

- PA 12 , 570

-
25 140 x1
,
(12 570)
,

2 -
 Practice Question No. 31:
Practice Question No. 29: Practice Question No. 30:
Mr. N 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
=> -
-

- -
-
- -Employment Income 34,000
-

100
-
Y
Employment Income 40,000 750
%
- x

- Employment Income of 74,000 - ~Trading Income 56,000

- Property---
-

Income 13,000 -

- Property Income of 52,000

-

- -Income from DT 7,000 > WHT 45%

=

- - =

- Qualifying Donation of 15,000 -

-
- ~Income from IIP 2,400 N/ - WHi %
- Qualifying donations of 3,600 20

-
:
-
-

- Qualifying Loan Interest expense of 2,000

- -

Compute Tax Payable? - ~Dividend Income 20,000

>
-

- He paid Qualifying Loan Interest of 5,000

500
Compute Tax Payable? -
-

-
= -

- He made Qualifying donations of 6,500.

Income Tax Return Non
Saving
As Net income exceeds -

Compute Tax?
Income Return
Therefore
74
Tax Non
Saving Employment 000 100 000 PA
-
>
-

, ,

40 000 52 Return
Employment property reviewed. Income Tax
000
-

,
-
,
will be
13 Total 126,000 Net income
Property 000 income 126, 000 Non
Saving Dividend As Net
of
-
-
,

Total 53 000 Personal allowance (1820) &D(4500) Employment 34

gross
100 727 + 20 000 120 727
-

,
-
,
000 =

, ,
=
,

pp(-
-

(2 000)
-

124 180 56
Qualifying
loan interest Taxable income
Trading 000
exceeds 100
-

000

grop
- -
,
, , ,

J
Net 51 Net income Tax 121 500 DT-xo 12 727 be
therefore.
income ,
000 -
> As -
&

PA will
~ , ,

Personal (12 570) than 124 180 42 8440 limit (100 000) llP 700x100%
>
allowance is N/S 200 x 20 %: 3000
:
reviewed
. -
&
=
, , ,

Taxable income 38 430 81 980 40 %: 32792

Therefore Dividend
x 21 500
, 100 000
,
,
Excess ,
- -
20,000 - Net income 120 727 ,

(8125)
124 180
#2- Total
need to
T 12 570 20 ,000 &D

P
income 105 727
~ no
gross
-

,
, ,

NS 38 430 38 430 x 20 %= 76 review PA 500 x1 (10150 Qual. loan interest (5000) PPC (*)
gross
: ·

, , ,
-

Net income 100 727 20 000 112 602

~

,
.
AND ,

PA Personal (6269) (100 000

Remaining limit
1820 allowance .

Taxable income 94 458 ,

20 ,
000 Excess 12 602
,

Tax Bands T -
PA 12 , 570

4500 42 200 94 458 45 825 9165 (630

102x
I 37,700 + =
, N/5 : , , x20 % =
·

4500 19 453
&

Tax Bands ~
42 ,
201 , 140
125 + :
129 640 ,
48 633x40 %
,
=
,

Remaining
I 37 700 18 750 56 , 450 X 500 0 %: 0 PA 6269
, + ,
=
129 641 , Div .
:
20, 000 x

56 451 125 140 + 18 , 750 = 143 890 19 500 x 33 75 %

.

= 6581
, ,
, ,

143 891 Tax

liability
X 35, 199
,

Tax Credit (5%3)

28 , 812

Tax Band
~

I 37 700
,
+ 8125 =
45 825
,

45 826,
125 140 + ,
8125 :
133 265 ,

133 ,
266 X
 Net 165 750 + 19 000 + 20 000 204 750
- As
of
Practice Question No. 32: income , , ,
:
,
-

exceeds 100 000 PA will be reviewed.

Mr. D has following data for the current year
thergore
,
- -

:
- Employment Income 80,000 -
Net income 204 ,750
-
-

- Property Income 36,000 RD (10 625)

gross
-
- -
,

- Income from REIT 47,000 > WHT 20 % - :

1 (
-

grosspeo
-
-

- Income from Bank interest 19,000

-
-
-
·

- ~Dividend Income 20,000

194 125

-As
-
-

- He paid Qualifying Loan Interest of 9,000

T - -
,

- He made Qualifying donations of 8,500. ANI exceeds PA wil e

Therefore
- - 125140
Compute Tax? >
-

Income Tax Return Saving Saving Dividend

Non

80 000 Tax Bands

Employment
-
,

48 325
Property
·
36 ,000 & -

I 37 700 +
, 10 625 .
=
,

a 100 % 358 750 ,

T -
48 326
,
125 140 +,
10 625 ,
: 135 765 ,

-
Bank interest -
19 ,000 >

135 766
,
X

Dividend -
20 000 ,

Total 174 750 ,

19 ,
000 20, 000

(9 000)
Qualifying loan interest ,

Net income 165 750 ,

19 ,
000 20 , 000

Personal allowance (w) ( -

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

= 204 750 ,
>
-

Additional
-

-165 ,
750 48 325 ,
x20 % = 9665
87 440 ,
x 40 % --
34 976 ,

135 765 ,

29 985x45 % ,
= 13 493
,

Sav = 19 ,000 19 000 ,

x 45 % =
8550

Div : 20 ,000 500 X0 % = 0

19 500 ,
x 39 35 % .
=
7673

Tax Liability 74 357 ,

Tax Credit
(11 750)
,

Tax
Payable
62 607 ,