Hi I'm studying for the ATT Personal Income tax exam, it's proving to be quite difficult with distance learning as there is nobody to ask questions to (have to pay for this benefit)
I'm stuck on this question.
Lewis has the following income in 2013/14
Salary and benefits 145,000
Bank interest received 22,000
Dividends received from UK companies 22,500
Calculate his tax liability for the year.
This is my answer:
Non-savings
Interest
Dividends
Salary
145,000
Bank interest (22,000 x 100/80)
27,500
Dividends (22,500 x 100/90)
25,000
Net income
145,000
27,500
25,000
Less: Personal allowance
0
0
0
Taxable income
145,000
27,500
25,000
Tax
32,010 @ 20%
6,402
117,990 @ 40%
47,196
150,000
22,500 @ 45%
10,125
25,000 @ 37.5%
9,375
73,098
Less: tax credit in interest
-5,500
Less: tax credit on dividend
-2,500
Tax liability
65,098
The answer in the book is £73,098 so my calcualtion is right up to that figure. Now I can't work out why they are not taking off the tax already paid on the dividend and bank interest?? it seems to me if this is not taken off then they are paying tax twice on them both.
If anyone could help me understand I'd be very grateful.
I hate these sort of trick questions as like yourself I go the whole hog and calculate the tax payable rather than only the tax liability which is the figure before applying the tax credits.
Your calculations basically perfect. The way that I lay them out though I include another column to the right showing the tax credits. (Non savings, Savings, dividends, Tax Credits).
Also if I had been writing it out long hand I would have broken down the £117990 in £112990 and £5000 although thats just semantics and the way that one's used to writing these out.
As I say, basically perfect but went further than you needed to as they only wanted the liability rathe rthan the tax due.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks Shaun, I'm terrible for reading questions wrong! I better be more careful with this, I will struggle to answer all the questions in the exam within the time as it is without answering extra questions!
Thanks again
Rachel
As you could probably tell I've hit that sort of question myself in the past in my studies (different qualification, same issues).
How are you finding the ATT studies?
I've got it earmarked for CPD as I like that ATT breaks down tax rather than expecting one to go into an exam knowing everything about everything which to my mind is a little unrealistic for such an enormous subject.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I love the course, far more interesting than AAT (in my opinion).
I'm finding it hard going, there is a LOT to learn and the tolley handbooks are hard to use. But it is very enjoyable.
Unfortunately I ordered all 3 exam manuals to do this year but I am only going to be able to do one each year - under estimated the amount of studying needed.
Doing the course as a standard basic correspondence course and I find Tolley's manuals brilliant, they are really well laid out and they also have video tutorials - I watch these when I don't really understand a chapter.
This is definitely the CPD route for me methingks,
kindest regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I have registered as a student for ATT. As we offer it, i thought the best way of brushing up on it was taking the exams.
Unfortunatly, with ICAEW, i get exemptions from the interesting units like Business tax and corporate compliance, but i have to do the ethics and law exams. Two subjects i would rather avoid to be honest. But as the exemptions fees are the same as the exam fees i might just do them. Or atleast beg the AAT that i will do all their written exams if they can excuse me from the annoying multiple choice ethics and law e-assessments.
Nicck
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Nick
Nick Craggs FMAAT ACA AAT Distance Learning Manager
thats what I did with ACCA. I had exemptions from F1, F2 and F3 (1.1, 1.2 and 1.3 at the time) but like you I was thinking, it costs the same so where's the fun in that then!
The exams for those took the form of 50% multi choice, 50% long hand but the multi choice ones taught you that the ACCA are all about trick questions leaving you thinking but the answer that I wanted to give isn't there... So you reread the question, find the twist and you get through.
I joined at the same time as a group of others from my OU Certificate in Accounting (The old course B680) and within a couple of years was the only one left as the others hadn't taken the time to understand how the ACCA's mindset before rushing into exams at the higher level assuming that they would complete the qualification sooner by skipping exams.
I think that "just because you could doesn't always mean that you should" mindset has very much fed into much of the advice that I give to newstarts on here... I was going to respond to a post a few days back about people going straight from ICB to AAT level IV along those lines but (a) you beat me to it and (b) any post where I mention ICB is like fishing for ICB training providers who read the word ICB in my posts and just seem to assume the rest.
I'm not ready to study ATT yet and also the prices haven't hit your website yet but when all of our ducks have lined up how about a freinds and family discount lol. discount.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I am thinking of going in for ATT and am looking at buying the manuals and just sitting the exams.. Apart from my AAT tax, passed many moons ago, most of my experience has come from working in practice.. thought I might get myself right up to date, and make sure I have been taught the rules correctly!
My first step.... was to order a CTA study text.. I want to see what that bad boy contains!!!
lol. discount. 
