The Other Sources of Finances
Added on 2021-05-30
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Antonio’s Tax CalculationSalary shown in the table above is Antonio’s GROSS salary before deduction of IncomeTax and National Insurance. Personal Allowance is the amount allowed as “Tax Free”basis to each taxpayer and is fixed for each income year, says Collings, (2015).Antonio’s tax has been calculated after first deducting the ‘Personal Allowance’ thenthe personal insurance amount and income tax has been calculated on the remainingbalance.Antonio gets £32,000 per annum as gross salary and his Personal Allowance is £11,500per annum. After deducting the personal allowance, his Gross Taxable Income is£18,500. Since Antonio has not reached state pension, he is liable to pay only NationalInsurance Contributions (NIC), asserts PWC, (2013). After deducting the income taxand NIC, Antonio’s final “Take Home Amount” is £25,039.68. ANSWER – 1 (b) (i)Expected expenditure of Claire’s household as a single parent: See TABLE – 1 inAppendix.ANSWER – 1 (b) (ii)So far Claire has been managing her house and her daughter Lulu on her own terms andwithin the amount of money that she earns on her own. Entering into a relationship andthen start a life in which Claire will have to share not only her earnings, but also herpersonal space and also her daughter. Lulu has been accustomed to sharing her livingstyle, her personal space and her relationship with just two persons – her mother and hergrandmother, explains Wanjialin, (2004). After moving in with Antonio, her living stylewill also undergo lot of changes as she will now have to share her living style, herpersonal space and her relationship with Antonio too. Similarly, Claire’s mother willalso have to make adjustments after Antonio joins in as a family member, assertsRowes, (2004). In fact, Antonio will have to adjust his living style, his personal spaceand his relationship, to a large extent, with Lulu and her grandmother along with sharingeverything that was so far the exclusive domain of Claire’s small family, explian Miller& Oats, (2012). Another big change, and that is the financial change, which the newfamily of four people (Antonio, Claire, Lulu and Grandmother) will have to adjust is the“Cash Crunch”. From Table-1 & 2 it is evident that after they start living together and
do not bring about a change in the shown living expenses, the family will be facing a“Cash Shortage” of £116.70 every month, as detailed by Macleary, (2003).ANSWER – 1 (c)They expect their expenditures in the new shared home to be as follows: See TABLE –2 in Appendix.ANSWER – 1 (d)It is advisable for Claire and Antonio to plan their monthly expenditure and to includeeverything, from transportation to household expenses. It is essential to include periodicexpenses, such as property taxes and insurance payments.Credit counsellors advise thata household must save a minimum of £100 per month, i.e. 10% from every pay-checkuntil one reaches the goal. However, Claire and Antonio must aim for those savingschemes that offer the best return rates. The three most essential areas in which thecouple must contribute their savings are - for emergency; retirement and savings forcontingencies, as per Tiley & Loutzenhiser, (2012).The three most likely expenses from where the couple can wipe out the monthly deficitof £116.70. These are, Rent; Council Rates; Annual Holidays. If they shift to a low renthome, council rates will automatically come down. A cut of £250 in rent will reduce thecouncil rate by £50 and a cut of £1000 in annual holiday cost will help in saving £100per month. These three cuts will help in savings of £400 per month. A small adjustmentof £50 in household expenses will help in covering the £117 deficit and also help thecouple in saving £300 per month for emergency and contingencies, says Rolfe, (2005). ANSWER – 2 (a)In case Rasheed takes Option – A, he will have to pay £190 every month for 2 years forclearing the amount of £4,500 to the national firm with APR of 0%.
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