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

Tara has adjusted net income of £78,000 before any gift aid donation. Her child benefit received is £2,500. She pays a net gift aid donation of £8,000 in the year. What is her child benefit income tax charge?

The charge is £1,000. Gift aid of £8,000 net is £10,000 gross, which reduces adjusted net income from £78,000 to £68,000. The £8,000 excess gives 40 steps, so 40% of the £2,500 child benefit is charged.

  1. A£750
  2. B£250Correct
  3. C£0
  4. D£1,250

Explanation

Gross donation is £8,000 x 100/80 = £10,000. This reduces adjusted net income to £68,000. Excess over £60,000 is £8,000, which is 40 steps, so a 40% charge. 40% x £2,500 = £1,000.

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