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ACCA Applied Skills · Taxation (UK) · The use of exemptions and reliefs in deferring and minimising income tax liabilities

Raj has adjusted net income of £64,000 and receives child benefit of £1,800 for the year. He makes no pension or gift aid payments. What is his child benefit income tax charge?

The charge is £360. Income is £4,000 over £60,000, which is 20 steps of £200, so 20% of the £1,800 child benefit is charged. Charging 40% would wrongly double the percentage.

  1. A£360
  2. B£720Correct
  3. C£36
  4. D£1,800

Explanation

Excess over £60,000 is £4,000. £4,000 / £200 = 20 steps, giving a 20% charge. 20% x £1,800 = £360. The correct figure is therefore £360, so the option of £720 is wrong.

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