ACCA Applied Skills · Taxation (UK) · Income from employment
Priya, a UK resident, has employment income of £60,000 and no other income in the tax year. Her personal allowance is £12,570. Using the rates in the tax tables (basic rate band £37,700), what is her income tax liability on her employment income?
Her tax is £11,432. Taxable income is £47,430 after the £12,570 personal allowance. The first £37,700 is taxed at 20%, giving £7,540, and the remaining £9,730 is taxed at 40%, giving £3,892, so the total is £11,432.
- A£11,432Correct
- B£9,432
- C£12,000
- D£10,000
Explanation
Taxable income is £60,000 - £12,570 = £47,430. Basic rate: £37,700 x 20% = £7,540. Higher rate: £47,430 - £37,700 = £9,730 x 40% = £3,892. Total = £11,432. Option £9,432 is wrong because it taxes the whole amount above the basic rate band at only 20%. Option £12,000 is wrong because it applies 20% to the whole of £60,000.
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