Tx notes fa22 Final

Answer to Example 6
 
 
 
 
Income tax computation 2022/23
As Wendy started to trade on 1 July 2022 the first tax year of assessment is 2022/23.
2022/23 (Actual) (1/07/2022 - 5/04/2023) 
=
54,596
Non 
savings
Employment Income (3/12 x 40,000)
10,000
Trading Profit (W1)
54,596
Total Income
64,596
Personal allowance
(12,570)
Taxable income
52,026
Tax calculation:
37,700
@ 20%
7,540
14,326 @ 40 %
5,730
52,026
Income Tax Liability
13,270
(W1)
Adjusted profit
89,000
Less capital allowance (W2)
(34,404)
Trading income
54,596
(W2)
60%
Main 
Pool
Business 
use asset
Allowances
£
£
£
£
Accounting Period to 5 April 2023
–
Additions qualifying for AIA (max 9/12 x £1M)
Recording equipment
30,000
Computer
2,600
(32,600)
Other Additions:
Motor car ( < 51g/km)
10,400
Motor car ( >50g/km)
14,800
10,400
14,800
WDA 
×
18% x 9/12 
(1,404)
(1,404)
WDA 
×
6% x 9/12 
(666)
×
60%
(400)
Total allowances:
(34,404)
WDV c/f
8,996
14,134

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Answer to Example 7 
Normal Basis
£
Revenues
61,000
Cost of sales: Purchases less closing stock (29,000 – 1,800)
(27,200)
33,800
Motor expenses (3,600 x 60%)
(2,160)
Capital allowances (8,000 + (12,000 x 18% x 60%)
(9,296)
Adjusted Trading Profit
22,344
Cash Basis
Receipts (61,000 – 4,000)
57,000
Payments
Purchases & Expenses (29,000 – 2,000)
27,000
Equipment
8,000
Motor expenses (10,000 x 60% x 45p)
2,700
(37,700)
Adjusted Trading Profit
19,300

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Chapter 7
 
 
Answer to Example 1 
 
Albert 
Note
The loss is set off against the first trading profits to arise, to the maximum extent possible. Thus £3,000 
of the loss is set off in 2021/22 and the remainder carried forward to 2022/23.
2020/21
2021/22
2022/23
£
£
£
Trading income
nil
3,000
10,000
Less: carry forward relief
nil
(3,000)
(2,000)
Revised trading income
nil
nil
8,000
Working – loss memorandum
£
Trading loss
5,000
Less: carry forward relief in 2021/22
(3,000)
2,000
Less: carry forward relief in 2022/23
(2,000)
Loss carried forward 
nil

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Answer to Example 2
 Charles 
Trading profit assessments:
2021/22 
Year ended 31 December 2021
32,000
2022/23
Year ended 31 December 2022
25,000
2023/24
Year ended 31 December 2023
NIL
Income tax computations 
๏
A CURRENT YEAR claim against total income in 2023/24 would waste the personal allowance
and save no income tax, hence no claim is made in the current tax year. 
๏
A CARRY BACK claim to 2022/23 will also waste the PA, but will generate a repayment of tax 
of 20% on what would otherwise have been a taxable income of £18,430 (31,000 - 12,570).
๏
A CARRY FORWARD CLAIM: The balance of the trading loss £53,000 (£84,000 - £31,000) will 
then be carried forward against the first available future trading profits that arise from the same 
trade.
2021/22
2022/23
2023/24
£
£
£
Trading profit
32,000
25,000
Nil
Property income
6,000
6,000
6,000
Total income
38,000
31,000
6,000
Less reliefs
Loss relief against total income
(31,000)
(–)
Net income
38,000
–
6,000
PA
(12,570)
(12,570)
(12,570)
Taxable income
25,430
–
–

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