Arthur and Mary are married and their incomes for tax year 2020 are the following:

Arthur:

Non Savings 95,000

Dividends 20,000

Mary:

Non Savings 8,000

Tasks:

(i) Calculate the total income tax and the income tax payable for Arthur and Mary

for tax year 2020.

(ii) Arthur's tax consultant advised him that it would be more tax efficient if the

dividends were received by Mary, since she would be paying less income tax. Calculate

how much less income tax would the couple be paying exactly if Mary owned the

shares and received the dividends paid out of them (instead of Arthur).

(iii) Explain briefly to them why there is a difference between the 2 scenarios above.

TAX RATES AND ALLOWANCES The following tax rates and allowances are to be used in answering the questions. INCOME TAX RATES TAX YEAR 2020 Tax Rates Tax Rates Non-Savings Savings Dividends for Dividends 0% X (N/A) 1-5,000 E X (N/A) N/A 20% 1-37,500 E 5,001-37,500 E 1-37,500 E 7,5% 40% 37,501-150,000 E 32,5% 45% 150,001 E +and over 38,1% Personal allowance for persons until 65 years old: 12,500 E Income limit for personal allowance: 100,000 E Personal Savings Allowance: up to 1,000 E Dividend allowance: 2,000 f CAPITAL GAINS TAX RATES TAX YEAR 2020 Lower tax rate 10% or 18% Higher tax rate 20% or 28% Annual Exempt Amount 12,000 E INHERITANCE TAX RATES TAX YEAR 2020: 1-325,000 E Nil Excess - Tax rate in case of death 40% Excess - Tax rate in case of lifetime transfer 20%