Matilda is a marketing manager earning an annual salary of £38,000

Matilda is a marketing manager earning an annual salary of £38,000. Plus a bonus of £4000. Matilda received a small amount of interest from ISAs. Further, she has been offered the opportunity to have a company car and the company would provide all the fuel whether for work or private use.

Matilda is a marketing manager earning an annual salary of £38,000

Question 1 – Matilda
Matilda is a marketing manager earning an annual salary of £38,000. Plus a bonus of £4000. Also, she received a small amount of interest from ISAs. She has been offered the opportunity to have a company car and the company would provide all the fuel whether for work or private use. Also, she is very excited and has looked at the choices available to her. She is tempted to choose from the following cars

Car 1 – is a petrol car with a list price of £18,000 and CO2 emissions of 95g/km

Car 2 is a diesel car and costs £18,000 and has CO2 emissions of 200g/km

If Matilda chooses not to have a company car, her employer is prepared to pay her an additional £3000 per annum. Matilda currently runs her own car which she estimates costs her £3500 per annum including petrol, servicing, repairs and depreciation.

Required:
a)      Prepare Matilda’s income tax computation for the year, assuming that she chooses option 1 as her company car. What will her total tax liability be for the year?
b)      What would Matilda’s total tax liability be if she chooses car 2? Comment on your findings.
c)      Summarise the figures and factors that Matilda should consider when deciding whether to opt for the additional salary or company car.

Question 2 – Shula

Shula works for a local newspaper and earns £23000 per annum. She paid tax on her income of £3300. She is provided with a petrol driven company car, that has a list price of £15000 and which emits 100g/km of CO2. Her employer pays for all the fuel used.
During the year Shula made taxable profits of £11000 from a self-employed business and she received dividends of £681
Required:
a)      Carry out a tax computation for Shula to determine her total income tax liability for the year and any remaining tax that she owes or is owed.
b)      Calculate the total amount of national insurance contributions that Shula has to make detailing the various classes of National Insurance that she has to pay
c)      Explain how all of Shula’s income tax liability is settled and how her liability to national insurance contributions will be paid.

You should assume the indicative rates used in the lecture material as summarised in the next 2 tables:

Personal allowance

£12,500 per annum

Income tax rate

Dividend rate

First £37500 of taxable income

20%

7.5%

Next £100,000   of taxable income

40%

32.5%

Above £150000 of taxable income

45%

38.1%

National Insurance class 1 payable by employees

Primary threshold

£166 per week

Upper earnings limit

£962 per week

NI contributions on earnings between the primary threshold and UEL

12%

On earnings above the UEL

2%

National Insurance contribution classes 2 and 4 payable by self employed

Class 2

Class 2 small earnings exception

£6365

Class 2 rate

£3.00 per week

Class 4

Class 4 lower profits limit

£8632

Class 4 upper profits limit

£50000

Class 4 rate on profits between upper and lower limit

9%

Class 4 rate on profits above upper limit

2%

Car and fuel benefit

CO2 emissions

Appropriate % (petrol)

Electric car

0%

Up to 50g/km

16%

From 51g/km to 75g/km

19%

From76g/km to 94g/km

22%

95g/km

23%

Each additional 5g/km

1% increase

Max % charge 37% in all cases

37%

Fuel provided for private use

£24100