|
A married man aged 47 with two children aged 8 and 10 has the following income in 2002/03:
Profit from self-employment: £24,000
Employment earnings: £10,000
Dividends plus tax credits: £8,000
He also has a chargeable gain from selling shares of £10,000 (after indexation and taper relief).
He makes a contribution to a personal pension scheme of £5,000 gross, paying £3,900 net.
His tax liability is calculated as follows:
| |
Earnings |
Dividends |
Gains |
Total |
|
| |
£ |
£ |
£ |
£ |
| Income/gains |
34,000 |
8,000 |
10,000 |
52,000 |
| Less - |
|
|
|
|
| Personal allowance |
(4,615) |
|
|
(4,615) |
| Annual exemption |
|
|
(7,700) |
(7,700) |
|
| Taxable |
29,385 |
8,000 |
2,300 |
39,685 |
|
| Starting rate: |
|
|
|
|
| £1,920 at 10% |
192.00 |
|
|
192.00 |
| Basic rate on earnings: |
|
|
|
|
| £27,465 at 22% |
6,042.30 |
|
|
6,042.30 |
| (£29,385-£1,920) |
|
|
|
|
| Basic rate on dividends: |
|
|
|
|
|
| £5,515 at 10% |
|
551.50 |
|
551.50 |
| (£29,900+£5,000*-£29,385) |
|
|
|
|
| Higher rate on dividends: |
|
|
|
|
| £2,485 @ 32.5% |
|
807.62 |
|
807.62 |
| (£8,000-£5,515) |
|
|
|
|
| Capital gains tax |
|
|
|
|
| £2,300 @ 40% |
|
|
920.00 |
920.00 |
|
| Total tax |
6,234.30 |
1,359.12 |
920.00 |
8,513.42 |
|
| Less children's tax credit (£5,290 - 2/3 x £2,485) at 10% (£363.33) |
| Amount payable |
|
|
|
£8,150.09 |
(before deduction of dividend tax credits and other amounts paid)
*Higher rate tax relief on the pension payment is given by extending the basic rate tax band by the amount of the gross payment. |
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