Tx notes fa22 Final

Non-
savings 
income
Savings 
income
Total
£
£
£
Trading income
13,500
13,500
Bank interest
18,000
18,000
Total Income
13,500
18,000
31,500
Less: Personal Allowance
(12,570)
(12,570)
Taxable income
930
18,000
18,930
Non-savings 930 @ 20%
186
Savings
(5,000 – 930 = 4,070 starting rate band)
4,070 @ 0% 
0
1,000 @ 0% 
0
12,930 @ 20%
2,586
Income tax liability
2,772

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Answer to Example 6
 
 
 
 
Daisy Income Tax Computation 2022/23
Tax calculation: 
Daisy has non-savings taxable income in excess of £5,000, so the 0% starting rate for savings 
income is not applicable.
As Daisy is a basic rate taxpayer, her savings income nil rate band is £1,000.
Daisy has less than £2,000 of dividend income, so the dividend income nil rate band applies to all 
the dividend income.
Non-
savings 
income
Savings 
income
Dividends
Total
£
£
£
£
Employment Income
19,500
19,500
Bank deposit interest
10,000
10,000
Dividends
1,000
1,000
Total Income
19,500
10,000
1,000
30,500
Less: Personal Allowance
(12,570)
(12,570)
Taxable income
6,930
10,000
1,000
17,930
Non-savings 6,930 @ 20% 
1,386
Savings 1,000 @ 0%
0
9,000 @ 20% 
1,800
Dividends 1,000 @ 0%
0
Income Tax liability
3,186
Less tax deducted @ source
PAYE
(1,400)
Income Tax Payable
1,786

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Answer to Example 7 
 
 
Daisy Income Tax Computation 2022/23
Tax calculation:
The starting rate for savings income is not applicable as non-savings taxable income exceeds 
£5,000.
As Daisy is a higher rate taxpayer, she only has a savings income nil rate band of £500.
Dividends received are less than £2,000 so the dividend income nil rate applies.
Non-
savings 
income
Savings 
income
Dividends
Total
£
£
£
£
Employment Income
37,500
37,500
Bank interest
13,000
13,000
Dividends
1,000
1,000
Total Income
37,500
13,000
1,000
51,500
Personal Allowance
(12,570)
(12,570)
Taxable income
24,930
13,000
1,000
38,930
£
Non savings
24,930 @ 20% 
4,986
Savings
500 @ 0% 
0
12,270 @ 20% 
2,454
230 @ 40%
92
Dividends:
1,000 @ 0% 
0
Income Tax liability
7,532
Less: Tax su
ff
ered at source
PAYE
(5,000)
Income Tax Payable
2,532

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Answer to Example 8 
Mike Income Tax Computation 2022/23
Income Tax calculation: 
Answer to Example 9 
Ken Income Tax Computation 2022/23
Non-
savings
Total
£
£
Employment income
108,000
108,000
Total income
108,000
108,000
Less: Personal Allowance (W1)
(8.570)
(8,570)
Taxable Income
99,430
99,430
Non Savings
37,700 @ 20% 
7,540
61,730 @ 40% 
24,692
99,430
Income Tax Liability
32,232
Less: Tax deducted at source
PAYE
(32,000)
Income tax Payable
232
(W1) Normal personal allowance
12,570
Less 1/2 [108,000 – 100,000]
(4,000)
Revised Personal Allowance
8,570
Non-
savings
Savings Dividends
Total
£
£
£
£
Trading income
130,000
130,000
Bank interest
40,000
40,000
Dividends 
36,000
36,000
Total Income
130,000
40,000
36,000
206,000
Less: Personal allowance (W1)
(–)
(–)
Taxable Income
130,000
40,000
36,000
206,000

---

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Income Tax calculation: 
Ken is an additional rate taxpayer so has no savings income nil rate band. As non-savings taxable 
income exceeds £5,000 there is no 0% starting rate band to utilise.
The first £2,000 of dividend income benefits from the dividend income nil rate band irrespective of 
the level of other income. The remaining dividend income is top sliced, as it falls in the additional rate 
band and it is taxed at a rate of 39.35%.
[Alternatively and recommended if answering a written question simply state that as adjusted net 
income exceeds £125,140 the personal allowance is reduced to nil]
Non Savings
37,700 @ 20% 
7,540
92,300 @ 40% 
36,920
Savings
20,000 @ 40%
8,000
20,000 @ 45%
9,000
Dividends
2,000 @ 0%
0
34,000 @ 39.35%
13,379
Income Tax Liability
74,839
(W1) Normal personal allowance
12,570
Less 1/2 [206,000 – 100,000]
(53,000)
Restricted to
Nil

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Answer to Example 10
 
 
James Income Tax Computation 2022/23
Income Tax calculation:
James is a higher rate taxpayer, so has a savings income nil rate band of £500. As his non-savings 
taxable income exceeds £5,000 there is no 0% starting rate band available.
(W1)
As adjusted net income exceeds £100,000, the normal personal allowance is restricted: