Taxation Example B

James Howard is a widower living alone but employing a housekeeper. His income consists of the state basic pension (no earnings-related pension), an occupational pension of £2,000 a year, and gross income from UK investments, none of which is tax exempt, of £7,200. He pays £730 a year in mortgage interest.


In the summer of 2015 he estimates his tax liability for the current year as follows, ignoring the fact that the rate of basic state pension will rise in November and using the existing figure of £23.20 per week. Check his calculations.

State pension 1,206

Company pension 2,000

Investments 7,200

Total income 10,406

less Mortgage interest 730

Taxable income 9,676

less Allowances:

Single person's £1,375

Housekeeper £100 1,475

Net taxable income 8,201

Tax payable £8,201 at 30%


plus Surcharge at 15% on £1,700 of

investment income 255


(No purpose is served in claiming age allowance.)

Taxation Example A

Pay received in tax year

12 monthly amounts of £1,400 gross 16,800

Wife's part-time earnings 900

Interest on bank deposit account 1,212

Total income 18,912

less Allowable deductions: Interest paid on building society mortgage of £20,000 3,300

Employee's contributions to

company pension plan 840 4,140

Taxable income 14,772

less Personal allowances:

married rate 2,145

wife's earned income allowance 900 3,045

Net taxable income 11,727Taxation Example A

Refunds, Personal And Business Finance 2017

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