The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
The proforma for calculating an individual’s tax liability is very important. The method for arriving at the tax due is set out step by step in ITA 2007, s 23. This is illustrated in the attached proforma and is explained in words below.
The tax software will calculate the tax due automatically based on the entries made on the Tax Return; however, it is important to know the principles of the income tax computation so that you can check that it is correct.
Firstly, it is necessary to identify the amount(s) of income on which the individual is taxable in the tax year, using the rules applicable for each source of income. Each type of income is a component of the total tax liability.
The following are all components of total income:
* These sources of income are collectively known as non-savings income for the purpose of calculating the tax liability. ‘Non-savings income’ is income which is not savings income or dividend income.
Trust income may or may not be non-savings income, depending on the type of trust and the type of income. See the Interest in possession beneficiaries, Discretionary trust beneficiaries and Settlor-interested trusts guidance notes (all subscription sensitive).
Remember, where tax has been deducted at source (eg on salary) it is the gross amount of the income that is included in the income tax computation.
Foreign income tends to be taxed in the same way as its source. For example, foreign bank interest is taxable as savings income
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login