Phuong - Taxation in the UK - Chapter 9 - The personal tax computation
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Phuong - Taxation in the UK - Chapter 9 - The personal tax computation

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Going along with this presentation is the instruction for self-learning, hihi, but in Vietnamese :D ...

Going along with this presentation is the instruction for self-learning, hihi, but in Vietnamese :D

Hope it would be helpful for you in this quite boring subject ^^

(Please read comments from the bottom to the top)

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  • Lấy ví dụ dễ hình dung hơn cho cột thứ 3 của slide [6] héng. Bạn xem ví dụ 1, Activity 1 ở slide [12].

    £7,500 là non-savings income, sau đó trừ £6,475 (do Joe 55 tuổi nên ko áp dụng 2 personal allowances £9,490 hay £9,640 – xem slide [16]) -> sẽ có kết quả là £1,025

    Tax on non-savings income: £1,025 x 20% (basic rate) = 205

    Do £1,025 nhỏ hơn £2,440 (xem cột 3 ở slide [6]) thì phần tax on SAVINGS income sẽ là
    £1,415 x 10% = 141
    £3,585 x 20% = 717

    Sẽ thấy £1,025 (non-savings income) + £1,415 (một phần của savings income) = £2,440 (first limitation ở slide [6])

    Phần còn lại của savings income (£3,585) sẽ tính tax rate là 20%
    Trong đó, bạn sẽ thấy £1,415 + £3,585 = £5,000 (trong bài cho bank interest là £4,000 -> đây là loại savings income nhận NET- xem slide [9], cho nên phải grossed up nó lên bằng cách nhân 100/80, nghĩa là £4,000 x 100/80 = £5,000)
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  • Bổ sung thêm 1 ý nữa, đó là tax credit on dividends, nếu vượt quá income tax liability thì CANNOT repaid. Ví dụ, tax liability bạn tính ra là £2,000, và thuế bạn đã trả trên dividends (tax suffered) là £2,500 thì phần exceed (£500) sẽ KHÔNG được repayable.

    Cũng như vậy, tax liability £2,000, nhưng lần này thì tax SUFFERED on SAVINGS INCOME là £2,500 thì phần vượt quá (£500) sẽ ĐƯỢC repayable.

    Ý này đã được nhắc ở slide [9], [10] và [22].
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  • Đến đây thì mình đã giải thích xong Chapter 9. Công việc của bạn là practise, practise and MORE practise bằng cách làm tất cả các bài tập, ví dụ trong Chapter 9 này.

    Chúc các bạn học tốt và enjoy your working :)
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  • À, mình quên 1 điều, khi bạn tính thuế trên từng khoản thu nhập (slide [6]). Bạn cần tính luôn cả gitf aid (slide [18]). Lưu ý là khoản gifts này được xem như là NET với basic rate tax là 20%. Ví dụ, một người tặng số tiền £8,000 under the gift aid scheme, thì khi tính, bạn phải gross up nó lên, thành £10,000. Ví dụ trang 162 giải thích rất rõ cách tính này.
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  • Ở slide [11] liệt kê một số khoản thu nhập được miễn trừ (exempt income), có nghĩa là khoản thu nhập này sẽ ko tính thuế. Bạn xem thêm Activity 2 trang 157 sẽ rõ hơn. Vậy là các bạn cần phải lưu ý các khoản exempt income này, vì khi cho bài tập để thi, có thể mình sẽ chọn bất kỳ exempt income này đưa vào đề bài.
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Phuong - Taxation in the UK - Chapter 9 - The personal tax computation Phuong - Taxation in the UK - Chapter 9 - The personal tax computation Presentation Transcript

  • Unit 12: Taxation Chapter 9The personal tax computation Nguyen Hoang My Phuong menfuong@gmail.com Chau Hung College / BTEC - Edexcel http://chauhung.edu.vn
  • Chapter 9 The personal tax computation Scope of Various types Charges onincome tax of income income Personal tax Allowances computation Families Gift Aid
  • The scope of income tax: chargeable persons, chargeable income The key elements of a personal income tax computation – total income (savings/non-savings/dividend), net income, taxable income, computations of income tax liability The key stages in the transition from computation of incomeObjectives tax liability to income tax payable The different categories of charges Personal allowances and the circumstances in which they can be claimed How to prepare income tax computation
  • Scope of income tax - 1 Chargeable income Receipts which might be expected to recur(weekly wages or profits from running a business) tax year / fiscal year / year of assessment: from 6 April to the following 5 April the tax year 2009/10 from 6 April 2009 to 5 April 2010
  • Key elements of a personal income tax computation Income tax is deductible interest charged on taxable incomeNon-savings income personal allowance trade lossesSavings income Total income Net income Taxable income less lessDividend income The amount charged on the The balance of the liability individual’s income still to be settled in cashTax on non-savings income less lessTax on savings income total Tax liability Tax payableTax on dividend income tax reducer tax suffered Investment under EIS PAYE tax on salary Tax on building society interest EIS (Enterprise Investment Scheme) is designed to help smaller higher-risk trading companies to Tax credit on dividend income raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies
  • Scope of income tax – 3 Tax rates 40% 40% 40% 40% 32.5% (higher (higher (higher (higher (higher rate) rate) rate) rate) rate)£ 37,400 20% 20% (basic 20% rate) (basic (basic 20% rate) rate) (basic rate) 10%£ 2,440 20% 10% 10% (basic (savings rate) income 20% starting (basic £0 rate) rate) Non-savings Savings Dividend income income income (gross) (gross)
  • Various types of income – 1 Classification of income Income from employment, pensions & some social security benefits Profits of trades, professions & vocationsMain types Income from property businessof income Savings & investment income, including interest & dividends Miscellaneous income
  • Various types of income – 2 Savings income - 1Savings income Banks Financial institution owned by its members as a mutual organisation. Building societies Offering banking & related financial services, esp. mortgage lending Interest Gilts Interest paid on government securities Medium- to long-term debt instruments Debentures used by large companies to borrow money Accrued income scheme
  • Various types of income – 2 Savings income - 2 Interest on National Savings & Investments accounts (NS&I) (e.g. Investment account, Easy Access Savings account) Savings income Interest paid by listed UK companies on debentures & loan stock received gross Gilt interest Savings income Bank & building society interest (not NS&I account interest) received net of20% tax (“income Interest paid by unlisted UK companies on debentures & loantaxed at source”) stockNS&I: • Deducted income taxed at source can be repaid• a government department • Grossed up by multiplying by 100/80 Banks & building • If a recipient is not liable to tax offering savings & investment societies: private • can cover the tax suffered to the general public. organsations • can certify in advance that he is a non-taxpayer• one of the largest savings and received the interest gross organisations in the UK.
  • Various types of income – 3 Dividend income Stock dividend Offering shares instead of a cash dividend Cash alternative, if the amount of the stock dividend equals the market value of the shares 15% Amount of stock dividend Market value of shares, if • the amount of the stock dividend differs from the cash alternative by more than 15% • no cash alternativeThe tax credit on dividend income can be deducted in computing tax payable but cannot be repaidGrossed up by multiplying by 100/90 (tax credit of 10%)
  • Scholarships (exempt as income of the scholar) Betting & gaming winnings, including premium bond prizes Interest or terminal bonus on National Savings Certificates Many social security benefits (but the jobseeker’s allowance, the pension and certain incapacity benefits are taxable) GiftsExempt Damages and payments for personal injury (applying for both lump sumincome and periodical payments) Payments under insurance policies, so long as the person benefiting paid premiums and did not get tax relief for them Receipts on a retirement due to special events, or otherwise the ordinary ill health grounds (only applying to pensions paid under non- approved pension schemes) Interest on amounts repaid to borrowers under the income contingent student loans scheme Income on investment made though individual savings accounts (ISAs)
  • Activity 1 – in class1. Joe is aged 55. In 2009/10, he earns a salary of £7,500 from a part-time job and receives bank interest of £4,000. Calculate Joe’s tax liability for 2009/10.2. An individual has taxable income (all non-savings income) of £50,000 for 2009/10. What is the income liability?
  • Activity 2 – in classAn individual has the following income in 2009/10Building society interest received £6,400Dividends received £7,875Premium bond prize £5,000His personal allowance is £6,475. What is histaxable income?
  • Charges on incomeCharge on income A payment by the taxpayer which income tax law allows as a deduction Paid net (20%) Patent royalties Categories of charges on income Eligible interest Paid gross Copyright royalties
  • ExampleThree taxpayers have the following Trade profits:  A: £8,000  B: £3,000  C: £46,195Taxpayer A and B pay a non-trade royalty of £200(net). Taxpayer C pays a non-trade royalty of£1,280 (net).Calculate the tax payable for each.
  • Allowances deducted from net income Non-savings income Savings income Dividend incomeAllowances is deducted 1 2 3from Personal Individuals Note allowances All persons (including children) £6,475 People aged 65-74 years old Net income > £22,900 (income £9,490 (at any time in the tax year) limit for age-related allowance) then >=75 years old PAA = PA - (net income – £9,640 22,900)/2 (at any time in the tax year) (until PAA comes down to £6,475) Blind person’s allowance £1,890 (BPA) Also given for the year before registration, if the taxpayer had obtained the proof of blindness needed for registration before the end of that earlier year.
  • Activity 3 – at homeSusan has an annual salary of £37,000. She has aloan of £7,000 at 10% interest to buy shares in heremployee-controlled company, and another loan of£5,000 at 12$ interest to buy double glazing for herhouse. She receives building society interest of£2,000 a year.What is her taxable income for 2009/10?
  • Gift aid One-off and regular charitable gifts of money qualify for tax relief under the giftDefinition aid scheme provided the donor the charity a gift aid declaration In writingDeclaration Electronically via Internet Orally over the phone Must not to repayable Gifts Must not confer any more than a minimal benefit on the donor Gifts Treated as though it is paid net of basic rate tax (20%)
  • Activity 4James earns a salary of £58,000 but has no otherincome. In 2009/10 he paid £8,000 (net) under thegift aid scheme.Compute James’s income tax liability for 2009/10
  • Families Spouses Taxed as separate Income - people ageGiven same-sex couples rights Civil partnersand responsibilities identical tocivil marriage. Equal shares of the income Jointly own income- Income / generating property Capital gain Making a joint declaration On or after the date specifying the proportion of the declaration
  • Families - 2 Income Parents Minor children Capital gain not <= £100 (gross) / year not Other relatives’ Parents’ income income Parents’ income England, Wales, Under 18 Northern IcelandMinor children Scotland Under 16
  • Steps in the income tax computation Non-savings income1 Preparing a personal tax computation Savings income Total income Dividend income2 Dealing with non-savings income3 Dealing with savings income4 Dealing with dividend income5 Adding (2) + (3) + (4) Income tax liability If exceeding the income tax liability, this6 Deducting the tax credit on dividends deductible tax credit cannot be repaid Deducting the tax deducted at source from If exceeding the income tax liability, this7 savings income & any PAYE deductible amount can be repaid
  • ExerciseCalculate the personal tax of:1. Kathe has a salary of £10,000 and receives dividends of £4,500.2. Jules has a salary of £20,000, business of £30,000, net dividends of £6,750 and building society interest of £3,000 net. He is entitled to relief on interest paid of £2,000.3. Jim does not work. He receives net bank interest of £38,000. He is entitled to relief on interest paid of £2,000.
  • Quick quiz1. At what rates is income tax on non-savings income charged?2. What types of income are taxed at source?3. How is UK dividend income tax?4. What charges on income are paid net?5. What loan interest is allowable as a charge?6. What is the amount of personal age allowance available to a 70 year old?7. How is income from property jointly owned by spouses taxed?6
  • Chapter 9 The personal tax computation Scope of Various types Charges onincome tax of income income Personal tax Allowances computation Families Gift Aid
  • The scope of income tax: chargeable persons, chargeable income The key elements of a personal income tax computation – total income (savings/non-savings/dividend), net income, taxable income, computations of income tax liability The key stages in the transition from computation of incomeObjectives tax liability to income tax payable The different categories of charges Personal allowances and the circumstances in which they can be claimed How to prepare income tax computation
  • Q&Amenfuong@gmail.com