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ACCA Applied Skills · Taxation (UK) · The scope of income tax

In the income tax computation of a UK individual, in which order is the taxable income charged to tax?

Taxable income is charged in the order non-savings income, then savings income, then dividend income. The personal allowance is deducted from non-savings income first, and each type then uses the remaining bands in this sequence.

  1. ASavings income, then non-savings income, then dividend income
  2. BNon-savings income, then savings income, then dividend incomeCorrect
  3. CDividend income, then savings income, then non-savings income
  4. DNon-savings income, then dividend income, then savings income

Explanation

Income is analysed into non-savings, savings and dividend income. The personal allowance is set against non-savings income first, and tax is computed on non-savings, then savings, then dividends. The other orders misplace savings or dividend income.

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