The benefit is £3,920
(£14,000
×
28%) for 2022/23.
245
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Answer to Example 5
Lewis
£25,300
×
28%
×
8/12 = £4,723
The fuel was not available for first 4 months
Nico
£25,300
×
36% = £9,108
Fernando
£25,300
×
37% = £9,361
There is no reduction for the contribution made by Fernando since the cost of private fuel was not
fully reimbursed.
Jenson
£25,300
×
5% = £1,265
Sebastian
£24,600
×
28% = £6,888
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Answer to Example 6
(a)
Average method
(b)
Accurate method
Jack would not opt for the accurate basis as this gives a higher assessment.
Answer to Example 7
£
35,000 + 15,000
x 2%
500
2
Less: interest paid (as below)
(258)
242
6/4/2022 – 31/5/2022
£35,000
×
1%
×
2⁄12
58
1/6/2022 – 30/11/2022
£30,000
×
1%
×
6⁄12
150
1/12/2022 – 5/4/2023
£15,000
×
1%
×
4⁄12
50
258
£
6/4/2022 – 31/5/2022
£35,000
×
2%
×
2⁄12
117
1/6/2022 – 30/11/2022
£30,000
×
2%
×
6⁄12
300
1/12/2022 – 5/4/2023
£15,000
×
2%
×
4⁄12
100
517
Less: Interest paid (as above)
(258)
259
£
Personal Allowance
12,570
Benefits
(440)
Tax underpaid: 132
×
100/20
(660)
11,470
Tax code
1147L
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Chapter 10
Answer to Example 1
The total pension input allowed is made up as follows:
Note 1: Aston has adjusted income of £120,000 in the form of his salary for 2022/23 which does not
exceed £240,000 and therefore no tapering of the AA applies.
It can be seen from the above working that the current year’s AA is used first and then unused AA
brought forward is used on a FIFO basis.
Chapter 11
Answer to Example 1
The Class 1 and Class 1A NIC liability is as follows:
Employment Allowance of £5,000 would be deductible from the total Employer Class 1 NIC liability
of Riga Ltd.
Class 1A
Employer
6,400 + 4,320 = 10,720 @ 15.05% = £1,613
Answer to Example 2
AA for 2022/23 (note 1)
40,000
Unused AA b/f
- 2020/21 fully used
nil
- 2021/22 (40,000 - 30,000)
10,000
- 2022/23 (40,000 - 25,000)
15,000
Maximum gross contribution
65,000
Class 1
£
Employee
.
≤
£12,570 @ 0%
Nil
. [£50,270 – £12,571]
×
13.25%
4,995
. [£60,000 – £50,270]
×
3.25%
316
5,311
Employer
.
≤
£9,100 @ 0%
Nil
. [£60,000 – £9,101]
×
15.05%
7,660
7,660
Class 4
£
(£50,270 – £12,570)
×
10.25%
3,864
(£60,000 – £50,270)
×
3.25%
316
4,180
Class 2
£3.15
×
52 weeks
£164.00
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Chapter 12
Answer to Example 1
(£4.00 + £4.08) / 2 = £4.04p
Value 1,000
×
£4.04p = £4,040.
Answer to Example 2
Tina – Capital Gains tax computation - 2022/23
Note:
Tina’s taxable income of £50,000 exceeds the basic rate band of £37,700 and none of the
assets sold are residential property nor assets eligible for business asset disposal or investors’ relief,
so all of the taxable gains are taxed at 20%.
Painting
£
£
Disposal proceeds
500,000
Less Cost
(350,000)
Capital Gain
150,000
Investment commercial property
Disposal proceeds
310,300
Less incidental costs of disposal
(15,000)
Net proceeds
295,300
Less cost
(200,000)
Capital Gain
95,300
Antique vase
Disposal proceeds
10,000
Less cost
(15,000)
Capital loss
(5,000)
Net capital gains in 2022/23
240,300
Less AEA
(12,300)
228,000
Less Capital losses b/f
(15,000)
Taxable Gains
213,000
CGT
×
20% (Note)
42,600
Due
31/1/2024
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Answer to Example 3
(W1): Income Tax Computation
Basic rate band remaining = 37,700 – 7,430 = £30,270.
The taxable gain of £6,000 therefore falls wholly into the remaining basic rate band so the CGT rate
is 10% as the gain is not on residential property.
Answer to Example 4
(W1): Income Tax Computation
Basic rate band remaining:
37,700 – 28,430 = £9,270.
£
Capital Gain
18,300
Less AEA
(12,300)
Taxable Gain
6,000
Capital Gains Tax (W1)
6,000
×
10%
£600
Due
31/1/202
4
Trading profit
20,000
Less PA
(12,570)
Taxable income
7,430
£
Capital Gain
30,300
Less AEA
(12,300)
Taxable Gain
18,000
Capital Gains Tax (W1)
9,270
×
10%
927
8,730
×
20%
1,746
18,000
2,673
CGT Due
31/1/202
4
Trading profit
41,000
Less Personal allowance
(12,570)
Taxable income
28,430
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Answer to Example 5
W1 Income Tax Computation
The basic rate band is extended by the gross gift aid payment: (£37,700 + 2,400
×
100/80) = 40,700,
which means that the basic rate band remaining = £40,700 – £32,700 = £8,000.
Answer to Example 6
Note 1
The AEA is deducted firstly from the gain on the residential property as it would be subject to CGT
rates of 18% and 28% whereas the gain on the diamond ring would only be subject to rates of 10%
and 20%.
£
Capital Gain
26,300
Less AEA
(12,300)
Taxable Gain
14,000
Capital Gains Tax (W1)
8,000
×
10%
800
6,000
×
20%
1,200
14,000
2,000
CGT Due
31/1/2024
Trading profit
45,270
Less Personal allowance
(12,570)
Taxable income
32,700
Property
Ring
£
£
Gains
30,300
12,000
AEA (note 1)
(12,300)
Taxable Gains
18,000
12,000
CGT (note 2)
18,000 x 18% =
3,240
10,500 x 10% =
1,050
1,500 x 20% =
300
3,240
1,350
4,590
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Note 2
Taxable income for Gaynor is (21,770 – 12,570) £9,200, leaving an unused basic rate band of
£28,500 (37,700 - 9,200). As the gain of £18,000 on the residential property falls entirely within the
remaining basic rate band of £28,500 it will all be taxed at 18%.
This will leave (28,500 – 18,000) £10,500 remaining basic rate band to apply against the gain on the
diamond ring.
Once you have correctly deducted any capital losses and the AEA from those gains su
ff
ering CGT at
the highest rates and computed the resulting taxable gains, it will not then matter whether as above
you firstly tax the gain on the residential property or whether you firstly tax the gain on the diamond
ring as the di
ff
erence between the lower and higher rates is in both cases the same, 10%:
Answer to Example 7
Fiona
Net Capital gains are covered by the AEA. No losses to carry forward to 2022/23.
Fiona is taxed on taxable gains of £500 in 2022/23. No losses to carry forward.
12,000 x 10% =
1,200
16,500 x 18% =
2,970
1,500 x 28% =
420
3,390
1,200
4,590
£
2021/22
Capital gains in the tax year
15,000
Capital losses in the tax year
(10,000)
Net Capital gains in the tax year
5,000
2022/23
Capital gains in the tax year
17,000
Capital losses in the tax year
(4,200)
Net Capital gains in the tax year
12,800
AEA
(12,300)
Taxable gains
500
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