Identify all income received by individual (non-savings, savings, dividends). This is total income
STEP 1.
(includes salary, bank interests, dividends).
Subtract available tax reliefs – i.e pension scheme contributions, interest on qualifying loans.
STEP 2.
This is net income.
STEP 3. Deduct personal allowance (if applicable). This is taxable income. Personal allowance =
£12,500. It is reduced by £1 for every £2 over £100,00.
STEP 4. Split taxable income into savings, non-savings and dividends (subtract savings and dividends
income from taxable income).
STEP 5. Is personal savings allowance applicable?
- £0 - £37,500 tax bracket first £1,000 of savings is taxed at 0%
- £37,500 - £150,000 tax bracket first £500 of savings is taxed at 0%
- Anything above £150,000 = not available
STEP 6. When applying the relevant tax rates, apply the rate to your non-savings income first and apply
the relevant rate. Once you pass the first line of £37k you apply the next rate on that amount
only. THEN apply your savings, if you’re already over a threshold, you apply the higher tax rate
on the amount you are over. Then pour dividends.
STEP 7. Add up the different tax amounts you calculated. This is your total tax liability.
Tax Calculations!
INCOME TAX
, CAPITAL GAINS TAX
STEP 1. Identify the sale proceeds – the market value of the gain
STEP 2. Deduct disposal expenditure – incidental costs of disposal, for example agents’
commission. This is your net sale proceeds
STEP 3. Deduct initial expenditure – cost price of an asset, incidental fees for acquisition
STEP 4. Deduct subsequential expenditure on the asset to enhance its value, expenditure incurred
in establishing, preserving or defending the title to the asset – this is your total chargeable
gain
STEP 5. Deduct carried forward/carried across losses
STEP 6. Deduct annual exemption on £12,300 – THIS IS NOT AVAILABLE FOR COMPANIES
STEP 7. This is your taxable chargeable gain. Apply the relevant tax rate to this figure
Note – Business Asset Disposal Relief reduces the higher rate of CGT to 10%. There is
currently a lifetime allowance on £1, 000, 000 – you can get this relief where there is :
- ()
- The qualifying disposal of all/part of trading business
- Assets in a business that used to trade
- Shares in a trading company, or
- Shares in a company that used to trade
