Kish is an employee of Sin Ltd and his only source of income in 2019/20 is theremuneration received from Sin Ltd. Kish pays 5% of his salary into thecompany pension scheme and Sin Ltd pays 2% contributions. Kish also paid £24,000 (net) into his personal pension scheme. The company accounts show the following remuneration paid to Kish:

Salary	Bonus
	£	£
30 June 2019	120,000	5,000
30 June 2020	128,000	8,000

The bonuses are paid on 1 January following Sin Ltd’s year end.


Calculate Kish’s total tax liability for the tax year 2019/20. Calculate the maximum personal pension contribution that Kish can make in the tax year 2020/21 assuming his salary remains the same.

You should assume the tax rates for 2019/20 continue to apply in the future.

Tax Rates and Allowances 2019/20

Income Tax

Main Personal Allowances                                                                                 

Personal allowance	12,500
Income limit for personal allowance (Note 1) Marriage allowance (Note 2)	100,000 1,250

Note 1: When income exceeds the limit a clawback applies reducing the personal

             allowance by £1 for every £2 above the limit.

Note 2: Spouses/civil partners are able to transfer £1,250 of their unused personal

allowance to their partner if both are basic rate taxpayers.

Tax Rates and Taxable Bands

			Normal rate		Dividend rate
Basic rate	£0 - £37,500			20%	7.5%
Higher rate	£37,501 - £150,000			40%	32.5%
Additional rate	Over £150,000			45%	38.1%

Note 3: A personal savings allowance applies at a 0% tax rate, applied after the personal

allowance have been applied as follows:

                                                                  £  

Basic rate taxpayers                        1,000             

Higher rate taxpayers                         500

Additional rate taxpayers                   Nil

Note 4: The first £2,000 of dividend income is taxed at 0% for all taxpayers.

Note 5: The first £7,500 of rental income from renting part of the taxpayer’s home is tax free if rent a room relief is claimed.

Pension Scheme Limits

Annual allowance	£40,000
Lifetime allowance	£1,055,000
Maximum contribution than can qualify for tax relief without earnings	£3,600

 

 

 

 

 

AaBbCcDc AaBbCcl AaBbCC AaBbCc A T CIMA Re. Heading D-A- ,- T Normal 1 No Spac. He Paragraph Styles ISA Annual Subscription Limit Overall Individual savings Accounts limit Lifetime ISA (18 to 40) Help to buy ISA1,000 (initial maximum investment) then 200 per month 20,000 4,000 Relevant to Employees Authorised Mileage Allowances When an employee has business usage of their own car Up to 10,000 miles Over 10,000 miles 45p 25p Car Benefit Percentage 0-50 g/km 51- 75 g/km 76 - 94 g/km 95g/km (the base level of emissions) Each additional 5 g/km above the base level Diesel additional surcharge Maximum rate 16% 19% 22% 23% +1% +4% 37% Car Fuel Benefit The base figure for calculating car fuel benefits 24, 100 Relevant to Traders