Question 3
In 2019/20 Sasha earns a salary of 125,750 per annum and bank interest of
12,800 and dividends of 13,500. Sasha uses her own car to visit clients
and during 2019/20 her business mileage totals 25,000 miles. Her employer
reimburses her at a rate of 50p per mile.
Sashas civil partner is a higher rate taxpayer in 2019/20 but will have no source of income in 2020/21 due to a career break.
Calculate Sashas income tax liability for 2019/20 and explain what changes
Sasha and her civil partner should make for the tax year 2020/21 outlining
the tax savings that Sasha could achieve by making these changes.
(10 marks)
ISA Annual Subscription Limit
Overall Individual savings Accounts limit 20,000
Lifetime ISA (18 to 40) 4,000
Help to buy ISA 1,000 (initial maximum investment) then 200 per month
Relevant to Employees
Authorised Mileage Allowances
When an employee has business usage of their own car
| Up to 10,000 miles | 45p |
| Over 10,000 miles | 25p |
Car Benefit Percentage
| 0 50 g/km | 16% |
| 51 75 g/km | 19% |
| 76 94 g/km 95g/km (the base level of emissions) | 22% 23% |
| Each additional 5 g/km above the base level | +1% |
| Diesel additional surcharge | +4% |
| Maximum rate | 37% |
Car Fuel Benefit
The base figure for calculating car fuel benefits 24,100
Relevant to Traders
Capital Allowances
| Plant and Machinery | |
| Main pool | 18% |
| Special rate pool | 6% |
| Energy & water efficient equipment | 100% |
| Motor Cars | |
| C02 emissions up to 50 grams per kilometre | 100% |
| C02 emissions over 50 grams up to 110 grams per kilometre | 18% |
| C02 emissions over 110 grams per kilometre | 6% |
| Annual Investment allowance Rate of allowance Expenditure limit | 100% 1,000,000 |
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 taxpayers 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 |
Search Aa-POE EEEE AT A.0.A. AaBbcc AaBbCel AaBbcc AaBbcc TCIMA Re... Heading 1 Normal T No Spac... Paragraph Styles Tax Rates and Allowances 2019/20 Income Tax Main Personal Allowances Personal allowance 12,500 Income limit for personal allowance (Note 1) 100,000 Marriage allowance (Note 2) 1,250 Note 1: When income exceeds the limit a clawback applies reducing the personal D 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 Basic rate 0 - 37,500 Normal rate Dividend rate 20% 7.5% Higher rate 37,501 - 150,000 Over 150,000 40% 32.5% Additional rate 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: | Aa- A E EEEE AT O-A- AaBbcc AaBbcc AaBbcc AaBbcc A 1 CIMA Re. Heading 1 T Normal 1 No Spac... Paragraph Styles 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 Lifetime allowance Maximum contribution than can qualify for tax relief without earnings 40,000 1,055,000 3,600 PLEASE TURN OVER o - | Aa- PEEEEEAT D-A- AaBbCcDc AaBbCd AaBbcc AaBbcc A 1 CIMA Re. Heading 1 1 Normal 1 No Spac... He Paragraph Styles ISA Annual Subscription Limit Overall Individual savings Accounts limit Lifetime ISA (18 to 40) Help to buy ISA 1,000 (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 A. A SEE AI D A AaBbCcDc AaBbCal AaBbcc AaBbCc A 1 CIMA Re. Heading 1 1 Normal 1 No Spac... He Paragraph Styles Relevant to Traders Capital Allowances Plant and Machinery Main pool Special rate pool Energy & water efficient equipment 18% 6% 100% Motor Cars CO2 emissions up to 50 grams per kilometre CO2 emissions over 50 grams up to 110 grams per kilometre CO2 emissions over 110 grams per kilometre Annual Investment allowance Rate of allowance Expenditure limit 100% 18% 6% 100% 1,000,000 PLEASE TURN OVER o Bi Aa- D.A. AaBbCcDc AaBbcc AaBbcc AaBb C TCIMA Re. Heading 1 I Normal 1 No Spac.. Styles Paragraph Capital Gains Tax Annual exemption Standard rate of tax (assets other than residential property) Higher rate of tax (assets other than residential property) Standard rate of tax on residential property Higher rate of tax on residential property 12,000 10% 20% 18% 28% Entrepreneurs' relief: For trading businesses and companies held for at least one year (minimum 5% employee shareholding) Lifetime limit of gains Rate of tax 10,000,000 10% Lease Premium Formulae Capital proportion is 2% (n-1) P Chattels Formulae Gains restricted to 5/3(gross proceeds - 6,000) National Insurance (not contracted-out rates) Primary Class 1 employees 0 - 8.632 per year Above 8,632 - 50,000 per year Above 50,000 per year Secondary % Nil 12.0 2.0 NA Mailings Review View Help Design Layout Search Aa- A E EEEE 21 D.A. E A. AaBbCcDc AaBbcc AaBbcc AaBbcc AaBb 1 CIMA Re. Heading 1 1 Normal No Spac... Heading Styles Paragraph Above 70,05Z Loooooper year Above 50,000 per year TZ.U 2.0 Secondary Class 1 employer 0 - 8,632 per year Above 8,632 per year Nil 13.8 Class 1A employer On benefits in kind 13.8 Sole traders Class 2 3pw Class 4 Paid weekly If earnings are above the small profits threshold of 6,365 pa 0 - 8,632 per year Above 8,632 - 50,000 per year Above 50,000 per year Nil 9.0 2.0 PLEASE TURN OVER om Mailings Review View Help Design Layout Search Aa- A E EEEE 21 D.A. E A. AaBbCcDc AaBbcc AaBbcc AaBbcc AaBb 1 CIMA Re. Heading 1 1 Normal No Spac... Heading Styles Paragraph Above 70,05Z Loooooper year Above 50,000 per year TZ.U 2.0 Secondary Class 1 employer 0 - 8,632 per year Above 8,632 per year Nil 13.8 Class 1A employer On benefits in kind 13.8 Sole traders Class 2 3pw Class 4 Paid weekly If earnings are above the small profits threshold of 6,365 pa 0 - 8,632 per year Above 8,632 - 50,000 per year Above 50,000 per year Nil 9.0 2.0 PLEASE TURN OVER om Review View Help Design Layout O Search Aa- A EE ALI 2.A. AaBbcc AaBbCd AaBbcc AaBbcc A TCIMA Re... Heading 1 1 Normal 1 No Spac... He Paragraph Styles Rates of Interest Official rate of interest for benefits in kind Rate of interest on underpaid tax Rate of interest on overpaid tax 2.50% 3.25% 0.50% Supplementary Instructions 1 You should assume that the tax rates and allowances for the tax year 2019/20 will continue to apply for the foreseeable future unless you are instructed otherwise, 2. Calculations and workings need only be made to the nearest . All apportionments should be made to the nearest Search Aa-POE EEEE AT A.0.A. AaBbcc AaBbCel AaBbcc AaBbcc TCIMA Re... Heading 1 Normal T No Spac... Paragraph Styles Tax Rates and Allowances 2019/20 Income Tax Main Personal Allowances Personal allowance 12,500 Income limit for personal allowance (Note 1) 100,000 Marriage allowance (Note 2) 1,250 Note 1: When income exceeds the limit a clawback applies reducing the personal D 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 Basic rate 0 - 37,500 Normal rate Dividend rate 20% 7.5% Higher rate 37,501 - 150,000 Over 150,000 40% 32.5% Additional rate 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: | Aa- A E EEEE AT O-A- AaBbcc AaBbcc AaBbcc AaBbcc A 1 CIMA Re. Heading 1 T Normal 1 No Spac... Paragraph Styles 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 Lifetime allowance Maximum contribution than can qualify for tax relief without earnings 40,000 1,055,000 3,600 PLEASE TURN OVER o - | Aa- PEEEEEAT D-A- AaBbCcDc AaBbCd AaBbcc AaBbcc A 1 CIMA Re. Heading 1 1 Normal 1 No Spac... He Paragraph Styles ISA Annual Subscription Limit Overall Individual savings Accounts limit Lifetime ISA (18 to 40) Help to buy ISA 1,000 (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 A. A SEE AI D A AaBbCcDc AaBbCal AaBbcc AaBbCc A 1 CIMA Re. Heading 1 1 Normal 1 No Spac... He Paragraph Styles Relevant to Traders Capital Allowances Plant and Machinery Main pool Special rate pool Energy & water efficient equipment 18% 6% 100% Motor Cars CO2 emissions up to 50 grams per kilometre CO2 emissions over 50 grams up to 110 grams per kilometre CO2 emissions over 110 grams per kilometre Annual Investment allowance Rate of allowance Expenditure limit 100% 18% 6% 100% 1,000,000 PLEASE TURN OVER o Bi Aa- D.A. AaBbCcDc AaBbcc AaBbcc AaBb C TCIMA Re. Heading 1 I Normal 1 No Spac.. Styles Paragraph Capital Gains Tax Annual exemption Standard rate of tax (assets other than residential property) Higher rate of tax (assets other than residential property) Standard rate of tax on residential property Higher rate of tax on residential property 12,000 10% 20% 18% 28% Entrepreneurs' relief: For trading businesses and companies held for at least one year (minimum 5% employee shareholding) Lifetime limit of gains Rate of tax 10,000,000 10% Lease Premium Formulae Capital proportion is 2% (n-1) P Chattels Formulae Gains restricted to 5/3(gross proceeds - 6,000) National Insurance (not contracted-out rates) Primary Class 1 employees 0 - 8.632 per year Above 8,632 - 50,000 per year Above 50,000 per year Secondary % Nil 12.0 2.0 NA Mailings Review View Help Design Layout Search Aa- A E EEEE 21 D.A. E A. AaBbCcDc AaBbcc AaBbcc AaBbcc AaBb 1 CIMA Re. Heading 1 1 Normal No Spac... Heading Styles Paragraph Above 70,05Z Loooooper year Above 50,000 per year TZ.U 2.0 Secondary Class 1 employer 0 - 8,632 per year Above 8,632 per year Nil 13.8 Class 1A employer On benefits in kind 13.8 Sole traders Class 2 3pw Class 4 Paid weekly If earnings are above the small profits threshold of 6,365 pa 0 - 8,632 per year Above 8,632 - 50,000 per year Above 50,000 per year Nil 9.0 2.0 PLEASE TURN OVER om Mailings Review View Help Design Layout Search Aa- A E EEEE 21 D.A. E A. AaBbCcDc AaBbcc AaBbcc AaBbcc AaBb 1 CIMA Re. Heading 1 1 Normal No Spac... Heading Styles Paragraph Above 70,05Z Loooooper year Above 50,000 per year TZ.U 2.0 Secondary Class 1 employer 0 - 8,632 per year Above 8,632 per year Nil 13.8 Class 1A employer On benefits in kind 13.8 Sole traders Class 2 3pw Class 4 Paid weekly If earnings are above the small profits threshold of 6,365 pa 0 - 8,632 per year Above 8,632 - 50,000 per year Above 50,000 per year Nil 9.0 2.0 PLEASE TURN OVER om Review View Help Design Layout O Search Aa- A EE ALI 2.A. AaBbcc AaBbCd AaBbcc AaBbcc A TCIMA Re... Heading 1 1 Normal 1 No Spac... He Paragraph Styles Rates of Interest Official rate of interest for benefits in kind Rate of interest on underpaid tax Rate of interest on overpaid tax 2.50% 3.25% 0.50% Supplementary Instructions 1 You should assume that the tax rates and allowances for the tax year 2019/20 will continue to apply for the foreseeable future unless you are instructed otherwise, 2. Calculations and workings need only be made to the nearest . All apportionments should be made to the nearest
