Commentary

E1.101B Income tax calculation for individuals

Personal and employment tax

E1.101B Income tax calculation for individuals

E1.101B Income tax calculation for individuals

Income tax is an annual tax on income that is levied a tax year basis. The tax year begins on 6 April and ends on the following 5 April1.

For a discussion on the meaning of income, see E1.101.

The following persons are liable to pay income tax on their taxable income for the tax year, with the extent of the liability being dependent on their tax residence status:

  1.  

    •     individuals

  2.  

    •     trustees

  3.  

    •     personal representatives

  4.  

    •     companies

For further details, see E1.101.

The commentary below discusses the income tax calculation for individuals, including individuals who have died during the tax year (the calculation applies to income up to the date of death). Note, however, that the calculation may be modified where the individual is non-resident and chooses to limit their liability to income tax under ITA 2007, ss 810–828, see E6.125 and E6.126.

For details of the income tax calculation for trustees, see I5.1003. For details of the income tax calculation for personal representatives, see I4.534 and I4.535. For details of the income tax calculation for companies, see D4.122.

The income tax calculation is prescribed by the steps in ITA 2007, s 23 and is summarised in E1.101. The commentary below discusses each of the steps in detail.

Step 1—component income

Identify the amounts of component income to which the person is charged to income tax for the tax year. The sum of all the taxable component income for the tax year is known as the 'total income'.

Types of component

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