Income Tax

timer Asked: Dec 16th, 2015

Question description

Fred Murray (the musician) has recently opened his own retail shop selling musical instruments. He closes accounts on 30 June each year. His profit for the year to 30 June 2015 was £12,700 after having deducted the following expenses:

  • Entertainment to foreign customers £1,500 (of which £350 was for entertaining his own family)
  • Penalty fees for non-submission of tax return £650
  • Light and heat  £2,250 (of which 20% was for private use)
  • Painting of the interior of the musical shop £1,550

Fred has investments on the London Stock Exchange, earning dividends of £1,890 (net).  He also holds two savings accounts, a cash ISA earning £450 as interest and a deposit account earning £1,280 (net) as bank interest in the tax year 2015/16.

On 1st July 2015, Fred was appointed as a musician in a famous hotel earning £28,800 as a basic annual salary plus a monthly bonus of £250 for good performance during the 2015/2016 tax year. He received a diesel car with CO2 emissions of 174 g/km (list price £38,000) from his employer. Accessories added to the car cost a further £4,000. Fred’s employer pays for all the fuel for his car.


Calculate Fred’s income tax due for the year 2015/16.  (21 marks)

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