To decide the amount of the deduction the decision maker should
1) establish the chargeable income
Note If the total tax allowances (or pro rata amount) exceed the figure in 1. there will be no tax liability and therefore no need to follow 2. to 7.
2) deduct the personal allowance (Appendix 1)
2.1) in full if the assessment period is a year or
2.2) on a pro rata basis if the assessment period is less than a year (DMG38102)
3) deduct the appropriate amount for the lower tax band
(£4300 for the 98/9 tax year), or, if the assessment period is
less than a year, a pro rata amount, and carry the remainder over
to
4. Multiply the amount deducted by the lower rate of tax
(Appendix 1)
4) multiply any remainder from
3. above, up to £26,000, by the basic rate of tax
(Appendix 1)
5) add
3. and
4. together
6) where either the married couple's allowance or the
additional personal allowances is appropriate, deduct 15% of that
allowance (or a pro rata amount as above) from the total at
5.
Note The deduction is 20% if the tax year is from 6.4.94 to 5.4.95.
7) round up where necessary (DMG33011).
