PART 1: Income Tax and National Insurance
Carry-back of Gift Aid relief
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A donor may elect that a Gift Aid donation should be treated as if paid in the previous tax
year. Such an election must be made by the date that the tax return for the previous tax year
is submitted and no later than the 31 January which follows the end of that year.
In 2022-23, Owen (who is not a Scottish taxpayer) makes qualifying Gift Aid donations
totalling £760. He has no capital gains tax liability for the year. Show his income tax
computation if his only income for the year consists of business profits of:
(a) £28,895 (b) £12,785
Business profits
Less: Personal allowance
Taxable income
Income tax
Tax liability
950 246,590
(i) Gross donations are £950 (£760 x 100/80). Deemed tax deducted is £190.
(ii) In case (a), the tax liability exceeds £190 so there is no more to be done.
(iii) In case (b), the tax liability will be only £43 if the full personal allowance is given i.e.
(£12,785 -£12,570) = £215 x 20% = £43. So Owen must pay further income tax of
(£190-£43) = £147. This is achieved by reducing his PA by £735 to £11,835.
(iv) In case (c), the basic rate and higher rate limits are both increased by £950. This moves
£950 of taxable income from additional rate to basic rate and saves tax of £237.50
(£950 x 25%). The charity receives £950 but the cost to Owen is only £522.50 (£760 –
£237.50). Total tax relief is therefore £427.50 (i.e. £950 x 45%).
Fora Scottish taxpayer, the tax liability in (a) would be (£2,162 x 19%) + (£10,956 x 20%)
+ (£3,207 x 21%) = £3,275.45. In (b), the PA would be restricted to £11,785, giving a tax
liability of (£1,000 x 19%) = £190. In (c), the basic rate limit, the intermediate rate limit and
the higher rate limit would all increase by £950, moving £950 of taxable income from top
rate to basic rate and saving tax of £247 (£950 x 26%).
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Example_4.5
Example_5.3
Exercise_6.1
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