Final answer:
To prepare Amandeep's income tax for 2022-23, her adjusted gross income is calculated, from which deductions and personal allowances are subtracted to arrive at her taxable income. Different tax rates apply to different income bands in the UK tax system. Tax credits and other reliefs may also reduce the total tax due.
Step-by-step explanation:
Income Tax Computation for Amandeep
To compute the income tax for Amandeep for the tax year 2022-23, we first need to determine her adjusted gross income (AGI). Once we have the AGI, we subtract any applicable deductions and exemptions to find the taxable income. In the UK, not all income may be taxable for various reasons including tax-exempt forms of income, allowances and reliefs. There are also different rates that are applied progressively as income increases.
Let's assume Amandeep's AGI consists of wages, interest income, and may include other sources like dividends. From this amount, we deduct a personal allowance, which for the tax year 2022-23 is £12,570, and any other applicable deductions and exemptions that UK tax law permits. If Amandeep has other deductible expenses or eligible reliefs, those would be subtracted as well. The remaining amount is her taxable income.
For the purpose of tax computation, Amandeep's income will fall into different tax bands, each taxed at a different rate. If her earnings are within the basic rate band, she will pay a lower percentage, while higher earnings fall into higher tax rate bands, resulting in a higher percentage of tax. The specific amount of tax due can be found by applying the respective tax rates to the taxable income within each band.
We also consider any potential tax credits for which Amandeep is eligible, as these can reduce her total tax liability. If Amandeep's financial situation is complex, more detailed calculations may be needed and she may need to complete a full tax return rather than a simplified form.