UK Income Tax and Calculations

This document provides information about income tax payable, tax deductions, and tax planning in the UK. It explains the concept of overseas workday relief and its benefits. The document also includes a tax computation example and information about statutory redundancy pay. It is a useful resource for individuals looking to understand UK income tax and calculations.

UK income tax and
calculations

Table of Contents
SECTION A.....................................................................................................................................3
SECTION B.....................................................................................................................................6
Impact of Taxes and Tax Planning..................................................................................................6
Overseas Workday Relief................................................................................................................7
REFERENCES..............................................................................................................................10
Appendix........................................................................................................................................11

SECTION A
Income tax payable: The income tax payable is a form of account on the financial statements of a
particularly in the business obligations segment. Inside one year, it is accumulated with tax
payments to the state. Fiona’s estimation of the income tax owed in the country of residence of
the corporation is subject to the existing tax legislation (Juhandi, Fahlevi and Setiadi, 2019). One
element capable of calculating the depreciation expenses of an organization is the income tax
payments. When investigating a distinction between such a business's taxable income and
income tax expenditure, a withheld tax liability emerges. The difference could be due to the
complexity as to when the real taxation is due. For instance, when measured by accounting
principles, a corporation may owe $1,000 in taxable income. In accordance of given brief
calculation of net taxable income and payable are computed. The scenario includes different
kinds of transactions which need to be addressed in accordance of UK taxation system that is as
follows:
Accommodation (Note 2)- Usually, the disparity between the rental the charge, if any, and the
gross value of the house is deductible if you are furnished with housing whether rent-free or with
a rate that is below fair rent in Fiona’s case.
Fiona is not the real owner of the house and also not paying rental for staying at company
accommodation; but she is paying Utility bills for the property which is tax deductable. She can
show this bills as expenses and can reduced her gross salary with whole amount of utility bills
paid by her. She can get a tax rebate for amount equivalent to £45,000.
The role entails a specific security danger and, if you are with the armed services, extra housing
is given for your protection in Fiona’s case scenario.
Cars and vans (Note 3) - Tax is due on a business vehicle whether a worker, business manager or
their families or household has access to it for personal use. Personal allocates resources travels
between family and office in almost all situations. For affordable vehicles, vehicles with higher
Carbon emission and automobiles which can run on renewable fuels, the return of income is
smaller. This will also be deductible if you are using your company's van personally. If all you
do, though, is carry the van back overtime with your but don't use it for any other essential
private reason, no tax would be owed in Fiona’s case scenario.

Car details:
Make – Hyundai Kona
Model – 2019 model; SUV, 5 seater, Hybrid Petrol
List Price - £25,000
Type of engine – Gear automatic, four cylinder Hybrid-Petrol engine with two horse power
pickup.
CO2 emission – Do not emit CO2; ecofriendly as it only emits hydrogen which is not harmful.
Often, vehicles are not taxable if:
 They are issued for company also, and
 They are not and will not be available for new use.
 In reality, they are not commonly used.
Personal expenses (Note 4): if Fiona remain away from family and friends while for work to
spend funds for cash advances, such as magazines, confidential phone conversations to the sound
system or cleaning, even without charge being taxed, you will get a certain percentage of these
costs made back from the boss. For stops in the UK, the cap is £ 5 a week or £ 10 a month for
stops overseas (About tax on benefits, 2020).
Fiona is not using Music system to earn income; hence £2000 will be considered as expenses and
profit of £1000 as the basis of difference between market value and actual payment is not
recordable as profit because purchasing Music system is part of consumption not the earning
money from it.
Fiona
Annual Salary
DOB 01-06-1981
810601
810601/10
Annual Salary = 81060.1
Annual Salary = 81060
Bonus 15000

Interest received on building society account 3,242.5
Personal allowance 12500
Pension (81060*5%) 4053
Gross Salary 115,855
Donation = (3% * 112613) 3378.39
Other Income:
interest on her building society account
(4% * 112613) 4504.52
property was purchased in 2011 180000
company had spent 31000
211000
Market value as at 6th May 2018 250000
property currently had a market value 275000
rateable value 11600
company provided all the furniture 45000
Note: Car is not taxable as car is used only for business (Assumed).
Music system
On 6 July 2018 company lent Fiona a Music system 5000
On 31th March 2020 the market value of the system 3000
Purchased for 2000
Gain 1000
Tax computation

(-)PERSONAL ALLPWANCE £ 12,500.00
TAXABLE INCOME £ 85,496.61 £ 3,904.52 £ 9,761.30 £ 99,162.43
TAX PAYBLE
0-37500 20% £ 7,500.00
37501-95642 40% £ 19,198.64
SAVING HIGER 0-500 0
SAVING HIGER 500 £ 1,361.81 0
W1- 2020 TAX YEAR
ANNUAL SALARY 81060
PENSION 4053
P/A 12500
GROSS SALARY 97613
BENEFIT CAR, OTHER 7815
(-) ALLOWBLE DEDUTION PENTION 4053
(-) ALLOWBLE DEDUTION CHARATY 3378.39
TOTAL INCOME 105428
SECTION B
Impact of Taxes and Tax Planning
It provides an overview of numerous methods and areas of tax planning regarded and
summarised the applicable tax criteria in this article. Return on productive construction
programmes before taxes is estimated to be 20%. The real exchange rate for inflation
hedge is expected to be 5% as well as the inflation growth is low to be 2% in any country
(Feingold, 2013).

Gardening leave: This is a concept that is common in the banking sector in the U.K.
administrative leave. An employees would normally spend time lobbying, for instance
gardening, the word extended leave. Pay levels and expenses extend until the conclusion
of the time of leave (Richards, 2018).
Payment for training and skill development of employee: The organisation seeks to provide
many avenues of improving and progressing its careers, acknowledging that some
avenues are more appealing to younger generations, whereby others are much more
appealing to mature workers. An instance, the strategy of BTD, which is outlined in the
introduction towards this series, is that employers should play a leading role in
developing a strong talent planning pipeline.
Past due salary & bonus: "salary or salary" implies all wages (other than compensation for over
time jobs) which, when they were met in stated or tacit conditions of jobs, would've
been applicable to a worker for his / her jobs or for jobs completed like this in a jobs and
will include the base pay (i.e., all payments made, by whichever name he / she is called;
"Salary or wage".
Pay in lieu of unutilised holidays: The Working Time Rules 1998 govern the time to relax. It
notes that between the Business and the worker / collective arrangement the value of the
yearly leaves are accepted as well as the legislation forbids the trading of annual lees for
cash. The legislative limit of 28 business days is assigned to a full-term employee which
is up to 8 bank holidays might well be protected by the boss.
Payment in lieu of notice (PILON): If the worker is forced to cancel an employment for certain
notice period, a 'paying instead of notice' shall mean instant remuneration equivalent to
that paying by the worker as salaries or wages, for serving the entire notification period,
rather as a month's salary. Instead, insurance for the vacation entitlements requires
reimbursement if the worker receives them (Fullagar and Francombe-Webb, 2015).
Statutory redundancy pay up to £30,000:The £30,000 exception refers only to benefits which are
not income cash payments following termination of work. Thus, in determining if the
benefit of £30,000 (and thus excluded from tax) is protected by a component in the
dismissal agreement, the very first step is to consider if this amount is a benefit amount.
Statutory redundancy pay above £30,000: Earnings contributions stay contributions of earnings
until completed and as such are entirely taxable. There is no value in the £30,000

exception. However, for many other compensation received on termination, for instance
to reimburse the worker for loss of work or failing to provide a fair notice, the £30,000
exception applies. Such fees are not profits that will be paid outside of taxation in the
absence of the allowance of £ 30,000 (Hull and Donnelly, 2019).
Overseas Workday Relief
1. If one come to United Kingdom, became tax resident here as well as having international
income or earnings (i.e., incomes and earnings from outside United Kingdom) during his/her stay
in United Kingdom, one need to recognize more complicated tax laws. it is since the United
Kingdom tax scheme is attempting to tax someone resident in United Kingdom for their globally
incomes and earnings. If resident does not live in the United Kingdom, will be entitled to use the
tax justification for remittances if have international incomes or foreign earnings. Please notice
that, with effective from 6 Apr 2017, if satisfy such requirements, even if are resident and don't
live in the United Kingdom, HMRC will treat as resident as well as domiciled in United
Kingdom or deemed domiciled implying that cannot select tax basis for remittance.
Under remittance tax, one pay UK taxation in UK wages and earnings for tax year in whom they
occur, but one pay UK taxation regarding international incomes and foreign earnings only if they
are taken (or remitted) to United Kingdom. In fact, remittance basis may help discourage double
taxation. This is necessary to remember that if one have non-domiciled and have minimal sums
of unremitted overseas wages and profits (below £2,000 each tax year in United
Kingdom), remittance basis would automatically apply. In this scenario, unremitted international
wages and earnings will simply be beyond the jurisdiction of the United Kingdom tax
without need to make decision or argument. One will not forfeit tax-free personal exemption or
the annual tax-exempt sum of capital gains, neither will be responsible for the Remittance basis
(Kohlhase and Pierk, 2019
James, 2016).
2. The assignee would also require to recognize the revenue or dividends that will be needed to
be remitted to the United Kingdom within tax period. There are very detailed and complicated
rules for determining the sort of incomes and/or profits that an person has taken into the United
Kingdom when remitting sums to the United Kingdom from account that includes funds through
greater than one origin or for greater than one taxable year (Like account is recognized as "mixed

fund"). Such mixed fund laws can and often do give lead to major undesired tax consequences
for the unsuspecting. This is crucial that persons who are whether currently taxed on remittance
basis or have formerly been taxed on remittance basis obtain guidance prior remitting funds /
assets to United Kingdom This extends even if original source of funds was UK taxed earnings
and/or benefits.
3. If one non-UK citizen who come to live in the United Kingdom but haven't been citizen in the
United Kingdom for at least last three successive years of taxation in the United Kingdom,
one will be entitled to demand income tax exemption for overseas working days in first three
income taxes of UK residency. This exemption is applicable to individuals who claim tax base
for remittances and where wages for their international working days are compensated and held
international. Such profits are then payable in the United Kingdom and to the point that they are
repatriated to the United Kingdom (James, 2016).

REFERENCES
Books and Journals
Feingold, R. P., 2013. Every little girl can grow up to be queen: the coronation and The Virgin in
the Garden. Literature & History, 22(2), pp.73-90.
Fullagar, S. and Francombe-Webb, J., 2015. This Girl Can campaign is all about sex, not sport.
Hull, R. and Donnelly, R., 2019. THIS GIRL CAN FIGHT. Feminist Applied Sport Psychology:
From Theory to Practice.
Richards, L., 2018. Can girls play sport? Gender performativity in online responses to Sport
England’s This Girl Can campaign. In The Palgrave Handbook of Feminism and Sport,
Leisure and Physical Education (pp. 757-767). Palgrave Macmillan, London.
Kohlhase, S. and Pierk, J., 2019. The effect of a worldwide tax system on tax management of
foreign subsidiaries. Journal of International Business Studies, pp.1-19.
James, S., 2016. The complexity of tax simplification: the UK experience. In The Complexity of
Tax Simplification (pp. 229-246). Palgrave Macmillan, London.
Juhandi, N., Fahlevi, M. and Setiadi, S., 2019. Tax Policy and Fiscal Consolidation on Corporate
Income Tax. Journal of Business Management and Accounting, 1(1), p.322972
Online:
About tax on benefits, 2020 [online] available through :<https://www.citizensadvice.org.uk/debt-
and-money/tax/what-is-taxable-income/tax-on-benefits-in-kind/>.

Appendix