6.2 Taxable income

In addition to the allowances above, two-ninths of a salary or wage is allowed free of tax. This is added to the amount that is tax free because of allowances and this total is subtracted from the total income to get the taxable income (see Example 6).

6.3 Standard rate and reduced rates of tax

The rates of tax for 1966-8 were as follows:

the first Ј100 was taxable at Ј0-20 in the pound, the next Ј200 was taxable at Ј0-30 in the pound, the balance was taxable at Ј0-41 in the pound.

The rate at which the balance is taxed is called the 'Standard Rate'.

6.4 Tax deducted by employer

Employers receive a coding number from the Inland Revenue based upon the allowances and by looking this up against the total income in the tax tables provided, they find the amount of tax to deduct from pay. These tables automatically provide for the reduced rates of tax and for earned income allowance.

Example 6

Returning to the sample tax payer of Example 6, let us assume an earned income of Ј1300 and calculate how much tax he would have to pay.

Salary Ј1300

Coding allowance	Ј613
Earned income allowance | x 1300	Ј289
Total allowances	Ј902	902
Taxable income		Ј398
Taxation	Ј
The first Ј100 at 0-20	20-00
The next Ј200 at 0-30	6o-oo
Balance of Ј98 at 0-41	40-18
Total tax for the year	Ј120-18

Exercise J

Set out the appropriate items as in Example 6 and determine: i) the coding allowance, ii) the taxable income, iii) the annual tax (using the rates given in Section 6.3), iv) the monthly payment of tax for an income of Ј1000, for the following cases (assume National Insurance Allowance of Ј22 each time):

1. a single man;

2. a married man with two children between the ages of 11 and 16;

3. a single man paying a life insurance premium of Ј40;

4. a single man paying a life insurance premium of Ј40 and receiving Ј50 interest from shares;

5. a married man with one child aged 10 paying superannuation of Ј50.

7. Rates

7.1 Rateable value

Just as the Government raises money by taxation to pay for national requirements, so the County and Local Councils or County Borough Councils raise money to pay for local requirements. The cost of some items, such as teachers' pay and highways are shared between the Government and Local Authorities. These local taxes are called 'The Rates' and are levied upon all fixed property, for example, houses, land, factories and shops. In the case of a house, they are based on the rent at which it might reasonably be let, unfurnished, to tenants after deducting the cost of repairs and insurance. The figure arrived at is called the rateable value of the property. A house that could be sold for Ј5000 might have a rateable value of Ј150.

The Board of Inland Revenue determines the rateable value of the property within its area. The spending committees of the appropriate Councils determine how much they need to spend. After approval by the Finance Committee and the Council itself, and making allowance for any overspending in the previous year and grants from the Government, a total is reached of the net estimated expenditure for the year.