Calculate Sukhi's income tax liability for the tax year 19/20
Calculate Sukhi's capital gains tax for 19/20
Question 1 Sukhi retired and ceased employment on 31 December 2019. The following information is available in respect of Sukhi's earning during the tax year 2019/20: Employment Sukhi was employed as a teacher by a private grammar school and was paid a salary of 2,555 per month of which she contributed 5% into her employer's occupational pension scheme. Sukhi's employer contributed a further 10% on her behalf. During the period 6 April to 30 June 2019, Sukhi's granddaughter was provided with a free place at the private school run by Sukhi's employer. The normal fee payable would have been 4,600. The additional marginal expense of providing the place for the grandchild was 540. On 25 June 2019, Sukhi was given a gold watch valued at 750 as an award for her 25 years of teaching at her employer's school. Sukhi's employer provided her with an interest free loan so that she could purchase a season ticket for the train to work. The balance of the loan outstanding at 6 April 2019 was 8,000, and Sukhi repaid the loan in full on 31 December 2019 Savings and dividends Sukhi received 425 gross bank interest and 10,000 gross dividends during the 2019/20 tax year. Personal pension contributions Sukhi contributed 3,600 (net) into her personal pension scheme. Pension income During the period 1 January to 5 April 2020, Sukhi received the following gross pension amounts: 1,450 from her private pension 9,300 from her employer's occupational pension scheme Property Sukhi owned two residential properties which were let out unfurnished until both properties were sold on 31 December 2019. The following information is available in respect of both properties: Property 1 13,600 4,700 Property 2 17,200 2,600 Rent received during the tax year 2019/20 Allowable revenue expenditure (excluding mortgage interest) paid during the tax year 2019/20 Mortgage interest paid during the tax year 2019/20 Sale proceeds on 31 December 2019 Purchase cost 1,000 122,000 81,400 1,500 98,000 103,700 Tax rates and allowances 1. You should assume that the tax rates and allowances for the tax year 2019/20 and for the financial year to 31 March 2020 will continue to apply for the foreseeable future unless you are instructed otherwise. 2. Calculations and workings need only be made to the nearest . 3. All apportionments should be made to the nearest month. 4. All workings should be shown. Income tax Basic rate Higher rate Additional rate 1 - 37,500 37,501 to 150,000 150,001 and over Normal rates 20% 40% Dividend rates 7.5% 32.5% 38.1% 45% Savings income nil rate band - Basic rate taxpayers 1,000 - Higher rate taxpayers 500 Dividend nil rate band 2,000 A starting rate of 0% applies to savings income where it falls within the first 5,000 of taxable income. Personal allowance Personal allowance Transferable amount Income limit 12,500 1,250 100,000 Where adjusted net income is 125,000 or more, the personal allowance is reduced to zero. Residence status Days in UK Less than 16 16 to 45 46 to 90 91 to 120 121 to 182 183 or more Previously resident Automatically not resident Resident if 4 UK ties (or more) Resident if 3 UK ties (or more) Resident if 2 UK ties (or more) Resident if 1 UK tie (or more) Automatically resident Not previously resident Automatically not resident Automatically not resident Resident if 4 UK ties Resident if 3 UK ties (or more) Resident if 2 UK ties (or more) Automatically resident Child benefit income tax charge Where income is between 50,000 and 60,000, the charge is 1% of the amount of child benefit received for every 100 of income over 50,000 Cap on income tax reliefs Unless otherwise restricted, reliefs are capped at the higher of 50,000 or 25% of income. Corporation tax Rate of tax - Financial year 2019 - Financial year 2018 - Financial year 2017 19% 19% 19% 1,500,000 Profit threshold Value added tax (VAT) Standard rate Registration limit Deregistration limit 20% 85,000 83,000 Inheritance tax: tax rates Nil rate band Residence nil rate band Rate of tax on excess - Lifetime rate - Death rate 325,000 125,000 20% 40% Inheritance tax: taper relief Years before death: Over 3 but less than 4 years Over 4 but less than 5 years Over 5 but less than 6 years Over 6 but less than 7 years Percentage reduction 20% 40% 60% 80% Capital gains tax Normal rates 10% 20% Rates of tax - Lower rate - Higher rate Annual exempt amount Entrepreneurs' relief Residential property 18% 28% 12,000 10,000,000 10% Lifetime limit - Rate of tax Question 1 Sukhi retired and ceased employment on 31 December 2019. The following information is available in respect of Sukhi's earning during the tax year 2019/20: Employment Sukhi was employed as a teacher by a private grammar school and was paid a salary of 2,555 per month of which she contributed 5% into her employer's occupational pension scheme. Sukhi's employer contributed a further 10% on her behalf. During the period 6 April to 30 June 2019, Sukhi's granddaughter was provided with a free place at the private school run by Sukhi's employer. The normal fee payable would have been 4,600. The additional marginal expense of providing the place for the grandchild was 540. On 25 June 2019, Sukhi was given a gold watch valued at 750 as an award for her 25 years of teaching at her employer's school. Sukhi's employer provided her with an interest free loan so that she could purchase a season ticket for the train to work. The balance of the loan outstanding at 6 April 2019 was 8,000, and Sukhi repaid the loan in full on 31 December 2019 Savings and dividends Sukhi received 425 gross bank interest and 10,000 gross dividends during the 2019/20 tax year. Personal pension contributions Sukhi contributed 3,600 (net) into her personal pension scheme. Pension income During the period 1 January to 5 April 2020, Sukhi received the following gross pension amounts: 1,450 from her private pension 9,300 from her employer's occupational pension scheme Property Sukhi owned two residential properties which were let out unfurnished until both properties were sold on 31 December 2019. The following information is available in respect of both properties: Property 1 13,600 4,700 Property 2 17,200 2,600 Rent received during the tax year 2019/20 Allowable revenue expenditure (excluding mortgage interest) paid during the tax year 2019/20 Mortgage interest paid during the tax year 2019/20 Sale proceeds on 31 December 2019 Purchase cost 1,000 122,000 81,400 1,500 98,000 103,700 Tax rates and allowances 1. You should assume that the tax rates and allowances for the tax year 2019/20 and for the financial year to 31 March 2020 will continue to apply for the foreseeable future unless you are instructed otherwise. 2. Calculations and workings need only be made to the nearest . 3. All apportionments should be made to the nearest month. 4. All workings should be shown. Income tax Basic rate Higher rate Additional rate 1 - 37,500 37,501 to 150,000 150,001 and over Normal rates 20% 40% Dividend rates 7.5% 32.5% 38.1% 45% Savings income nil rate band - Basic rate taxpayers 1,000 - Higher rate taxpayers 500 Dividend nil rate band 2,000 A starting rate of 0% applies to savings income where it falls within the first 5,000 of taxable income. Personal allowance Personal allowance Transferable amount Income limit 12,500 1,250 100,000 Where adjusted net income is 125,000 or more, the personal allowance is reduced to zero. Residence status Days in UK Less than 16 16 to 45 46 to 90 91 to 120 121 to 182 183 or more Previously resident Automatically not resident Resident if 4 UK ties (or more) Resident if 3 UK ties (or more) Resident if 2 UK ties (or more) Resident if 1 UK tie (or more) Automatically resident Not previously resident Automatically not resident Automatically not resident Resident if 4 UK ties Resident if 3 UK ties (or more) Resident if 2 UK ties (or more) Automatically resident Child benefit income tax charge Where income is between 50,000 and 60,000, the charge is 1% of the amount of child benefit received for every 100 of income over 50,000 Cap on income tax reliefs Unless otherwise restricted, reliefs are capped at the higher of 50,000 or 25% of income. Corporation tax Rate of tax - Financial year 2019 - Financial year 2018 - Financial year 2017 19% 19% 19% 1,500,000 Profit threshold Value added tax (VAT) Standard rate Registration limit Deregistration limit 20% 85,000 83,000 Inheritance tax: tax rates Nil rate band Residence nil rate band Rate of tax on excess - Lifetime rate - Death rate 325,000 125,000 20% 40% Inheritance tax: taper relief Years before death: Over 3 but less than 4 years Over 4 but less than 5 years Over 5 but less than 6 years Over 6 but less than 7 years Percentage reduction 20% 40% 60% 80% Capital gains tax Normal rates 10% 20% Rates of tax - Lower rate - Higher rate Annual exempt amount Entrepreneurs' relief Residential property 18% 28% 12,000 10,000,000 10% Lifetime limit - Rate of tax
