Redcued Personal Allowance >100k

JIMBO

Hi
My income in 16/17 breached the 100k limit for the first time and I am facing a big and rather unexpected tax bill as my coding was incorrect. I am checking the numbers to get a better understanding before submitting and paying my tax return.

[*]My gross salary income was £123686.
[*]I received £87 in interest on savings and £123 in dividends.

I have some misunderstanding of the reduction in the personal allowance. As the HMRC info tells me I lose £1 for every £2 over £100k earnt I would expect my PA to be zero. However, the self-assessment calculation is showing that I have a reduced personal allowance of £1974.
I am not going to complain about that but I am unclear how this is calculated - believe it is something to do with my pension payments and gift aid? I made donations of £534.76 to charity and pension payments of £4140.
Can anyone show me how £1974 is derived?
Thanks

Dazed_and_confused

Google adjusted net income.

Basically the personal allowance is based on a separate figure to your actual income and gift aid and pension payments are two things which make a difference.

Tom99

If you ignore your interest and dividends then take off charity and pension you get to about the figure you have quoted.

I don't know if ignoring interest and dividends is correct though.

Dazed_and_confused

You don't ignore interest and dividends and £1974 looks spot on assuming the op has quoted the gift aid and pension payments they made rather than the grossed up amounts which are what actually matter.

I think the Self Assessment return asks for the net figures and does the grossing up itself which is probably why the op has quoted those figures.

Could be wrong though, only op can say for certain.

BoGoF

In summary - total income £123,896 (£123,686 + £87 + £123 (grossed up dividend)


Deductions £5,175 (grossed up pension contributions) + £669 (grossed up gift aid) = £5844


Adjusted income £118,052 (£123,896 - £5844)


Excess over £100,000 = 18,052 divided by 2 = £9,026.


Restricted personal allowance £11,000 - £9,026 = £1,974.

JIMBO

Thank you BoGoF, exactly what I was looking for.