ACCA - F6 - Taxation FA 2010: Study Text by BPP Learning Media Ltd

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Extending the basic rate band is irrelevant as taxable income is below the basic rate limit. Question Gift Aid with higher rate relief James earns a salary of £65,180 but has no other income. In 2010/11 he paid £8,000 (net) under the gift aid scheme. Compute James' income tax liability for 2010/11. com Answer Non-savings Income £ 65,180 (6,475) 58,705 Salary/Net income Less: personal allowance Taxable income Income tax Basic rate band Basic rate band (extended) Higher rate band £ 37,400 × 20% 10,000 × 20% 11,305 × 40% 58,705 Question £ 7,480 2,000 4,522 14,002 Gift Aid with additional rate relief Matt has trading income of £182,000 in 2010/11.

In 2010/11 an individual can invest £10,200 in ISAs, of which up to £5,100 can be held as cash. Funds invested in ISAs can be used to buy stock market investments, such as shares in quoted companies or OEICs, units in unit trusts, fixed interest investments, or insurance policies. 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. Similarly, capital gains made within an ISA are exempt from capital gains tax.

It is deducted from net income, first against non savings income, then against savings income and lastly against dividend income. The personal allowance is reduced by £1 for every £2 that adjusted net income exceeds £100,000 and can be reduced to nil. • Taxpayers aged 65-74 are entitled to an age allowance and taxpayers aged 75 and over are entitled to a higher age allowance. The age allowance is reduced by £1 for every £2 that adjusted net income exceeds £22,900 but is generally not reduced below the amount of the personal allowance.

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