Managing my money
Managing my money

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Managing my money

2.2.1 Calculating Income Tax

This quiz tests your ability to calculate the Income Tax you should pay on an income.

Activity 2

Use the information you’ve just read to work out how much Income Tax would be paid by earning £26,000 (from employment or from a pension) for 2016/17.

You might find it helpful to work out your answer using the following process:

Income from employment or pension £26,000

Minus personal allowance £ ————-

Leaves taxable pay of £ ————-

Basic rate ————- % on £ ———— is £ ————-

Tax to be paid in the year 2016/17 is £ —————

a. 

£5000


b. 

£6000


c. 

£3000


d. 

£1500


The correct answer is c.

c. 

Well done. The full computation is as follows:

Income from employment or pension £26,000

Minus personal allowance £11,000

Taxable pay £15,000

Basic rate 20% on £15,000 is £3000

Tax to be paid in the year 2016/17 is therefore £3000

£3000 of tax would be paid.

This is calculated as follows: first, subtract the tax-free amount of £11,000 from £26,000 to give £15,000 of taxable income. The next £15,000 is taxed at 20%. This is £3000.


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