Taxation Fundamentals: Calculation of Taxable Income and Tax Reducers

TAXATION
FUNDAMENTALS

Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
PART 2............................................................................................................................................3
Tax Reducers..........................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Taxation, the encroachment of mandatory charges by government agencies on entities or
organizations (Freedman, 2015). In nearly every nation in the world, tax is levied predominantly
to increase government reserves and support government spending, even though tax revenue
is utilized many other purposes as well. The report consists of two parts, in part 1 the taxable
income of Fiona is calculated as per taxation rules and legislation. Whereas, part 2 is about tax
reducers in which certain type of investments and payments are recognised in taxation to reduce
taxable income.
PART 1
Fiona is domiciled and an individual in the UK form 6th April 2018 and getting enhanced
salary with accommodation facility by her employer form 6th May 2017. All the utility bills
subject to property would be payable to Fiona. She is also getting a car facility. There is a music
system also being used by her for private use the cost of music system is £5000. A personal
allowance of £11,850 also provided to Fiona and she contributes 5% of her monthly gross salary
into Rambo’s HMRC occupational pension scheme. She made some contributions in charitable
trusts to RSPCA. The aggregate value of these donations is mainly 3% of her gross salary. There
are following aspects needs to consider before computation of taxable income of Fiona;
Computation of taxable income of Fiona 2018/2019
£ £
Salary 78060.3
Occupation Pension
Scheme 5%of Salary 3903.015 74157.285
Bonus 12-05-18 15000
Benefits in Kind
1 Accommodation benefit
Annual Value 11600 11600
Additional Charge (275000-75000)*2.5% 5000 16600
2 Furniture Benefit 45000 *20% 9000
3 Car Benefit Price £24760 *27% 6685.2
95g 20.00%
1