Three brothers, Daniel, David and Derrick have been discussing their respective taxation affairs and how much they dislike paying tax. None of them are Scottish taxpayers. Daniel's income for tax year 2020-21 consists of income from property of £52,500 and net debenture interest of £416.

David has an annual salary of £88,000. PAYE deducted from this salary was £27,800 for 2020-21. David paid 4% of his salary into an occupational pension scheme, with his employer contributing 6%. He also had the use of company car for the whole of the tax year. When new in March 2020, the car cost his employer £35,000 but it had a list price of £35,900. David contributed £6,000 towards the cost of the car. It has a diesel engine and CO2 emissions of 102g/km. The employer pays all running costs of the car (including all fuel) and David pays his employer £100 per month as a contribution towards private fuel. During 2020-21, David also received £1,240 in dividends.

Derrick has an annual salary of £58,000. PAYE deducted from this salary was £10,790 for 2020-21. He was given an interest-free loan from his employer of £12,000 on 6 June 2020 to fund a luxury cruise for his sixtieth birthday. Derrick repaid £8,000 of this loan in January 2021 and intends to pay off the remaining £4,000 in October 2021.

All three brothers are delighted that their parents are still alive, although both were born in 1933. The parents were married in September 1954. Their father has a private pension which amounts to about £30,000 per year and they both receive the state pension.

Required:

(a) Calculate the income tax payable by Daniel for 2020-21.

(b) Calculate the income tax payable by (or repayable to) David for 2020-21.

(c) Explain to David what changes he could make that would help him save tax.

(d) Calculate the income tax payable by (or repayable to) Derrick for 2020-21. You do not need to compute the loan interest using the daily method. Assume that the official rate of interest is 2.25% per annum.

(e) Explain to Derrick how he could have avoided paying tax on the interest-free loan.

(f) Calculate the total National Insurance contributions payable by both David and his employer for 2020-21.

(g) Explain how the married couple’s allowance will operate in the circumstances of the father and mother. You are not required to complete any calculations.