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David

David is employed and also self-employed. David has tried to prepare his own income tax computation for the tax year 2018/19, but he has found it more difficult than expected. Although the sections which David has completed are correct, there are a significant number of omissions. The omissions are marked as outstanding (O/S). The partly completed income tax computation is as follows:

DAVID – INCOME TAX COMPUTATION 2018/19

                                                          Note                      Amount

Trading income

Employment income

Property business

1

2

O/S

65,065

O/S

Building society interest

Dividends

 

Personal allowance

Taxable income

 

1,260

         O/S

O/S

  (11,500)

         O/S

Income tax

Non-savings income: £34,500 @ 20%

 

 

6,900

Non-savings income: O/S @ 40%

Savings income: £500 @ 0%

Savings income: O/S @ 40%

Dividend income: O/S @ 0%

 

O/S 0

O/S

0

Dividend income: £800 @ 32.5%

 

260

Income tax liability

Tax suffered at source - PAYE

 

O/S

 (9,130)

Income tax payable

 

       O/S

Note:

  1. Trading profit

David commenced self-employment on 1 January 2018. He had a tax adjusted trading profit of £3,840 for the 4-month period ended 30 April 2018, and £12,060 for the year ended 30 April 2019. These figures are before taking account of capital allowances.

The only item of plant and machinery owned by David is his motor car, which cost £18,000 on 1 September 2018.

The motor car has a CO2 emission rate of 102 grams per kilometre, and 70% of the mileage driven by David is for private journeys.

  1. Property business profit

David owns a freehold shop. The shop was purchased on 1 October 2018, and during October 2018 David spent £8,400 replacing the building's roof. The shop was not usable until this work was carried out, and this fact was represented by a reduced purchase price.

On 1 December 2018, the property was let to a tenant, with David receiving a premium of £12,000 for the grant of a 30-year lease. The monthly rent is £960 payable in advance, and during the period

1 December 2018 to 5 April 2019 David received five rental payments.

Due to a fire, £8,600 was spent on replacing the roof of the shop during February 2019. Only £8,200 of this was paid for by David's property insurance.

David paid insurance of £480 in respect of the property. This was paid on 1 October 2018 and is for the year ended 30 September 2019.

Other information

David did not make any personal pension contributions during the tax year 2018/19. He has never been a member of a pension scheme.

Requirements:

a

Calculate the income tax payable by David for the tax year 2018/ 2019 

Marks: 11
b

Advise David why the maximum gross amount of tax relievable personal pension scheme contribution which he could have made for the tax year 2018/19 is £40,000, and the method by which tax relief would have been given if he had made this amount of contribution.

Marks: 4