Kish is an employee of Sin Ltd and his only source of income in 2019/20 is theremuneration received from Sin Ltd. Kish pays 5% of his salary into thecompany pension scheme and Sin Ltd pays 2% contributions. Kish also paid £24,000 (net) into his personal pension scheme. The company accounts show the following remuneration paid to Kish:

Salary	Bonus
	£	£
30 June 2019	120,000	5,000
30 June 2020	128,000	8,000

The bonuses are paid on 1 January following Sin Ltd’s year end.


Calculate Kish’s total tax liability for the tax year 2019/20. Calculate the maximum personal pension contribution that Kish can make in the tax year 2020/21 assuming his salary remains the same.

You should assume the tax rates for 2019/20 continue to apply in the future.

Tax Rates and Allowances 2019/20

Income Tax

Main Personal Allowances                                                                                 

Personal allowance	12,500
Income limit for personal allowance (Note 1) Marriage allowance (Note 2)	100,000 1,250

Note 1: When income exceeds the limit a clawback applies reducing the personal

             allowance by £1 for every £2 above the limit.

Note 2: Spouses/civil partners are able to transfer £1,250 of their unused personal

allowance to their partner if both are basic rate taxpayers.

Tax Rates and Taxable Bands

			Normal rate		Dividend rate
Basic rate	£0 - £37,500			20%	7.5%
Higher rate	£37,501 - £150,000			40%	32.5%
Additional rate	Over £150,000			45%	38.1%

Note 3: A personal savings allowance applies at a 0% tax rate, applied after the personal

allowance have been applied as follows:

                                                                  £  

Basic rate taxpayers                        1,000             

Higher rate taxpayers                         500

Additional rate taxpayers                   Nil

Note 4: The first £2,000 of dividend income is taxed at 0% for all taxpayers.

Note 5: The first £7,500 of rental income from renting part of the taxpayer’s home is tax free if rent a room relief is claimed.

Pension Scheme Limits

Annual allowance	£40,000
Lifetime allowance	£1,055,000
Maximum contribution than can qualify for tax relief without earnings	£3,600

 

 

 

 

 

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AaBbCcDc AaBbCcl AaBbCC AaBbCc A T CIMA Re. Heading D-A- ,-田。 T Normal 1 No Spac. He Paragraph Styles ISA Annual Subscription Limit Overall Individual savings Accounts limit Lifetime ISA (18 to 40) Help to buy ISA£1,000 (initial maximum investment) then £200 per month £20,000 £4,000 Relevant to Employees Authorised Mileage Allowances When an employee has business usage of their own car Up to 10,000 miles Over 10,000 miles 45p 25p Car Benefit Percentage 0-50 g/km 51- 75 g/km 76 - 94 g/km 95g/km (the base level of emissions) Each additional 5 g/km above the base level Diesel additional surcharge Maximum rate 16% 19% 22% 23% +1% +4% 37% Car Fuel Benefit The base figure for calculating car fuel benefits £24, 100 Relevant to Traders AaBbCcDc AaBbCcl AaBbCC AaBbCc A T CIMA Re. Heading D-A- ,-田。 T Normal 1 No Spac. He Paragraph Styles ISA Annual Subscription Limit Overall Individual savings Accounts limit Lifetime ISA (18 to 40) Help to buy ISA£1,000 (initial maximum investment) then £200 per month £20,000 £4,000 Relevant to Employees Authorised Mileage Allowances When an employee has business usage of their own car Up to 10,000 miles Over 10,000 miles 45p 25p Car Benefit Percentage 0-50 g/km 51- 75 g/km 76 - 94 g/km 95g/km (the base level of emissions) Each additional 5 g/km above the base level Diesel additional surcharge Maximum rate 16% 19% 22% 23% +1% +4% 37% Car Fuel Benefit The base figure for calculating car fuel benefits £24, 100 Relevant to Traders

Answer rating: 100% (QA)

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