Skip to content

ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: property and investment income

Grace has employment income of £60,000, bank interest of £2,000 (received gross) and dividends of £3,000. Her personal allowance is £12,570. Using the Finance Act 2025 rates (basic rate band £37,700; normal rates 20% and 40%; dividend upper rate 33.75%; savings nil rate band £500 for higher rate taxpayers; dividend nil rate band £500), what is her total income tax liability?

Her total income tax liability is £12,875.75. This is £7,540 and £3,892 on employment income, £600 on savings after the £500 nil rate band, and £843.75 on dividends after the £500 nil rate band. All savings and dividends fall in the higher rate band.

  1. A£12,875.75Correct
  2. B£12,675.75
  3. C£12,250.75
  4. D£13,244.50

Explanation

Taxable income is £47,430 of employment income plus £2,000 savings and £3,000 dividends. Employment income: £37,700 × 20% = £7,540 and £9,730 × 40% = £3,892. Savings are all in the higher rate band, so £500 is nil-rated and £1,500 × 40% = £600. Dividends: £500 is nil-rated and £2,500 × 33.75% = £843.75. The total is £12,875.75. Using a £1,000 savings nil rate band gives £12,675.75.

Did you get it right without looking?

One question tells you little. A timed set on Income tax: property and investment income shows your real accuracy, how long you take and where you lose marks.

Practise Income tax: property and investment incomeFree diagnostic mock

More Income tax: property and investment income questions