Jasmin’s gross salary is $3,500 per month. Her tax free allowances are shown in the table below
|National Insurance||5% of Gross Income|
|Personal Allowance||$4,000 per year|
- her gross yearly salary
- her total tax – free allowances for the year
- her taxable yearly income
A 10% tax is charged on the first $25,000 of taxable income.
A 20% tax is charged on the portion of taxable income above $25,000.
- the amount of income tax Jasmin pays for a year.
Tax Free Allowances = 5% of Gross Salary + $4,000 for Personal Allowance
Taxable Yearly income = Gross Yearly Income – Tax free Allowances
RECALL: Taxes can ONLY be charged of TAXABLE INCOME.
We have to charge taxes on $35, 900. We have already charged taxes on $25,000 and we therefore now have to charge taxes on ($35,900$25,000) $10,900 at a rate of 20%