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TonyTax, Tax Consultant
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Can someone help me with the follow Mary has begun the calculation

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Can someone help me with the follow
Mary has begun the calculation of her Income Tax liability for 2013/14 as follows:
Total Non Savings Savings Dividends
£ £ £ £
Employment 10,440 10,440
Interest (gross) 28,000 28,000
Dividends (gross) 8,000 8,000
Total income 46,440 10,440 28,000 8,000
Personal allowance (9,440) (9,440)
37,000 1,000 28,000 8,000
Mary made a gross personal pension contribution of £1,500 in the year.
Calculate the Income Tax liability for Mary for 2013/14.
You say Mary made a gross pension contribution of £1,500. All pension contributions end up gross. Was it paid net of basic rate tax relief?
Customer: replied 2 years ago.
Hi, Thank you for you response.The pension contribution is the area I am have difficulty with.Wouldn't the basic rate brand increase from £32,010 to £33,510 which is tax at 20 per cent
If the pension contribution was paid net of basic rate tax relief of 20%, you would extend the basic rate band by the gross amount, £1,500 from £32,010 to £33,510, that's correct.
If the pension contribution was paid gross, you would simply allow it as a deduction of £1,500 along with the personal allowance.
I hope this helps but let me know if you have any further questions or need me to do the calculations.
Income received (before tax taken off)
Pay from all employments 10,440.00
Interest received from UK banks and building societies 28,000.00
Dividends from UK companies (plus 10% tax credits) 8,000.00
Total income received 46,440.00
minus Personal Allowance (9,440.00)
Total 9,440.00
Total income on which tax is due 37,000.00
Your basic rate limit has been increased by 1,500.00 to 33,510.00 for pension payments etc. This reduces the amount of income charged to higher rates of tax.
Pay, pensions, profit etc. 1,000.00 @ 20% = 200.00
Interest received from a bank or building society etc. 1,790.00 @ 10% = 179.00
26,210.00 @ 20% = 5,242.00
Dividends from companies etc. 4,510.00 @ 10% = 451.00
3,490.00 @ 32.5% = 1,134.25
Total income on which tax has been charged 37,000.00
Income Tax charged 7,206.25
minus 10% tax credits on dividends from UK companies (not repayable) 800.00
Income Tax due after dividend tax credits 6,406.25
If tax was deducted from the salary and the bank interest, that needs to come off the bot***** *****ne.
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