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Calculating an individual’s income tax liability
KEY POINTS
- The seven steps comprising the basic tax calculation are in ITA 2007 s 23.
- Establishing the amounts and types of income.
- Reliefs have to be set against the relevant income.
- Seven rates of income tax apply for 2014/15.
It is January. You have hit the send button on the last tax return you intend to complete that day and you are logging off when the phone rings.
It is a client who has just received her tax return.
She is worried because she has an unusually high income tax liability that she wants you to explain.
You give her a non-committal answer about changes of tax rates allowances and payments not made but it becomes clear that she wants you to explain exactly how the tax computation works.
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