Taxation Fundamentals: Explanation of Income Tax and NICs Payment, Calculation of Income Tax and NIC for Different Options, and Analysis of Tax Evasion and Avoidance

TAXATION
FUNDAMENTALS

Table of Contents
SECTION A.....................................................................................................................................3
Make a report giving the detailed explanation about the payment of income tax and it NICs.
................................................................................................................................................3
SECTION B.....................................................................................................................................6
PART 1............................................................................................................................................6
(a) Calculate the income tax and NIC for both the options....................................................6
(b) Perform the calculations of disposable income after deductions......................................6
(c) Which of the two option will be best for Gloria for the taxation perspective...................7
PART 2............................................................................................................................................7
(a) Distinguish between tax evasion and avoidance with the help of examples....................7
(b) Analyse the two recent policies of the last five years for the reduction of tax avoidance and
evasion....................................................................................................................................7
PART 3............................................................................................................................................7
Analyse how the HMRC will assess whether Mrs Jill Johnson will be subject to personal
income tax or capital gains tax using determined instances...................................................7
REFERENCES................................................................................................................................9

SECTION A
Make a report giving the detailed explanation about the payment of income tax and it NICs.
The assessments of income tax are calculated for the year 2020-2021 on the basis of the income
which in earned form the sources of taxpayer's.
 Salary and Bonus: The gross salary of Fiona is £97,081. It is calculated by reversing the
date of birth 07.08.97 and divided by 10. Fiona was eligible for the bonus of £15,000 on
22nd March 2020, but was paid on 12th May 2020. It means for the tax year 2020-21 and
will be taxable in the existing fiscal year.
 Contribution: Fiona paid 5% of her gross monthly salary into a registered company
pension scheme. The gross pension contribution is £4,854. The amount will be deducted
from their annual income instead of increasing the tax rate.
 Personal Allowance: It is a taxation free income up to £12500 for the year 2020-21 and
is reduced if the adjusted net income is more than £100,000.
The husband of Fiona is Christian, and is unemployed so transfers the marriage allowance to
Fiona. This amount usually corresponds to 10% of the personal basic allowance. However, if
either spouse is a high taxpayer, the transfer will not take place. Fiona is not entitled to the
personal allowance as she is the one who is earning more and the amount of the marriage
allowance cannot be transferred to her.
 Gift – aid: Fiona does charitable donations as gift aid of a net worth of 3% of gross
income, that is 2912. This amount must first be grossed, therefore, £3,640 will be added
to expand Fiona's' base tax rate and higher tax rate, resulting in further tax relief.
 Other income: The interest which is to be received by Fiona is on the rate of 4% of the
gross salary. Additionally, Fiona is receiving a income of dividend of £9,708 which
contributes the 10% equalisation of the gross salary.
Other Benefits
 Company's Accommodation: The geographical area used by Fiona was purchased more
than six years ago so the value of the accommodation provided will be £250,000, which
is the value of the house at the time of their shift in their house. Additionally, the
improvement costs of 31,000 will be charged, but before the start of the tax year.
The yearly value is £11,600