Finance and Accounting Problem Essay Example | Topics and Well Written Essays - 1500 words

Finance and Accounting Problem - Essay ExampleBank interest is deducted at source at the rate of 20%. Therefore, they cannot be included as valueable income. Depreciation reflects how resolved assets of business reduce in value through wear and tear. However, depreciation is just an accounting archetype with nothing to do with taxation. Depreciation can be manipulated and taxmen do not recognize it as an allowable tax. Instead, annual capital allowance is computed. Vehicle of businesses have a standard rate of 25% on a reducing balance. In April 2008, Annual Investment Allowance (AIA) of ?50,000 per annum was introduced. This allowed business entities to spend ?50,000 annually and state the full cost against tax. For Sams case, the tax written down value for the car in 2012 is ?6,750. According to the tax law in the UK the capital allowance on the car is the lower of 25% of the written down value of the car or ?3000 each year. ... 234.00 affix Car Tax (178 g/km) ? 210.00 Less t hose form charity ? 100.00 ? 31,542.08 Notes pay as you earn tax and NIC thresholds are ?7,475 and ?7,225 per year respectively. Table 3- Computation of PAYE Income Rate Amount Amount ?7,475.00 ?35,000.00 20% ?27,525.00 ? 5,505.00 ?35,001.00 ?80,771.25 40% ?45,770.25 ? 18,308.10 Total ?23,813.10 Table 4- Computation National insurance policy Contribution (Sam is categorized as in class 4) Income Rate Amount Amount ?7,225.00 ?42,475.00 9% ?35,250.00 ? 3,172.50 ?42,476.00 ?80,771.25 11% ?38,295.25 ?4,212.48 Total ?7,384.98 The dividends paid as tax was 32.5% of ?720=?234 Car tax for a car producing 178 g/km CO2 is ? 210.00. Contribution to charity is computed taking into consideration that Sam declared that he is UKs tax payer. Therefore, Sam has to be refunded some money, which is computed as follows. The amount to be refunded = ?400? ((40-20) ?80) = ?100 Question 3 Table 5- Sams Income Tax and National Insurance Computation for 2011/12 if he is classified advertisement as an empl oyee of West London Ltd. Add PAYE ?22,303.12 Add NIC class 1D ? 11174.06 Add taxable dividends ?234.00 Add Car Tax (178 g/km) ?210.00 Income tax ? 3,477.18 Notes Table 6- Taxable income Item Amount Basic lucre ? 76,996.31 Benefits 0 Taxable income ? 76,996.31 Table 7- PAYE computation Income Amount Used Rate Amount ?7475.00 ?35000.00 ?27525.00 20% ?5505.00 ?35001.00 ?76996.31 ?41995.31 40% ?16798.12 Total PAYE ?22303.12 Sam earns higher income and will be paid ?90,000 annually inclusive of National Insurance Contributions. No reimbursement for any travelling or accommodation when away from home on branch visits and no refund for trade subscription and reference materials. Mileage payments for business travel. The mileage expenses are passport amounts