Section C

Scenario: Dr. Aris Thorne

Dr. Aris Thorne (aged 45) is a medical researcher and consultant. For the tax year 2023/24, he has the following income and outgoings:

1. Employment Income:
Aris is employed by a private hospital. His gross salary for 2023/24 was £85,000. During the year, his employer provided him with private medical insurance costing £1,200. His employer also paid £500 towards his professional medical subscriptions (which are on HMRC's approved list). PAYE deducted from his salary was £18,500.

2. Self-Employment Income:
Aris runs a private consultancy clinic. His tax-adjusted trading profit for the year ended 5 April 2024 was £42,000. This figure is before deducting capital allowances. On 10 May 2023, Aris purchased new medical testing equipment for £15,000. The main pool balance brought forward at 6 April 2023 was £4,000.

3. Investment Income:
Aris received UK dividends of £4,500 and building society interest of £1,800. Both figures are the actual amounts received.

4. Outgoings:
Aris made net contributions of £3,200 to his personal pension scheme. He also made a Gift Aid donation of £800 (net) to a medical charity.

Required:
Calculate Dr. Aris Thorne's Income Tax payable for the tax year 2023/24.

Note: You should clearly show all steps, including the calculation of capital allowances, total income, net income, taxable income, and the extension of the basic rate band.

**1. Employment Income:** Salary: £85,000 Add: Medical Insurance (BIK): £1,200 Less: Professional subscriptions: (£500) (Allowable as on HMRC list) Net Employment Income = £85,700 **2. Self-Employment Income:** Capital Allowances: Main pool b/f: £4,000 Additions qualifying for AIA: £15,000 (AIA claimed in full = £15,000) WDA on main pool: £4,000 x 18% = £720 Total Capital Allowances = £15,000 + £720 = £15,720 Trading Profit = £42,000 - £15,720 = £26,280 **3. Total Income:** Non-Savings Income = £85,700 + £26,280 = £111,980 Savings Income = £1,800 Dividend Income = £4,500 Net Income = £118,280 **4. Personal Allowance:** Net Income is over £100,000, so PA is restricted. Adjusted Net Income (ANI) = £118,280 - Gross Pension (£3,200 x 100/80 = £4,000) - Gross Gift Aid (£800 x 100/80 = £1,000) = £113,280. Excess over £100k = £13,280. PA reduction = £13,280 / 2 = £6,640. Revised PA = £12,570 - £6,640 = £5,930. **5. Taxable Income:** Non-Savings: £111,980 - £5,930 (PA) = £106,050 Savings: £1,800 Dividends: £4,500 Total Taxable Income = £112,350 **6. Tax Calculation:** Basic Rate Band (BRB) = £37,700 + £4,000 (Pension) + £1,000 (Gift Aid) = £42,700. *Non-Savings Tax:* £42,700 @ 20% = £8,540 £63,350 (@ 40%) = £25,340 (Total Non-savings taxed = £106,050) *Savings Tax:* Aris is a higher rate taxpayer, so Personal Savings Allowance (PSA) is £500. £500 @ 0% = £0 £1,300 @ 40% = £520 *Dividend Tax:* Dividend Allowance = £1,000 (for 23/24) £1,000 @ 0% = £0 £3,500 @ 33.75% = £1,181.25 Total Tax Liability = £8,540 + £25,340 + £0 + £520 + £0 + £1,181.25 = £35,581.25 Less PAYE: (£18,500) **Income Tax Payable = £17,081.25**