Answer and Explanation:
To calculate Pierre's income tax liability for 2021/22, we need to consider the different types of income and apply the relevant tax rates.
1. Calculate Pierre's total taxable income:
Non-savings income: £3,000
Savings income: £2,800
Dividend income: £3,500
Total taxable income = Non-savings income + Savings income + Dividend income
Total taxable income = £3,000 + £2,800 + £3,500 = £9,300
2. Determine the tax bands and rates for the 2021/22 tax year in the UK. As of the tax year 2021/22, the tax bands and rates are as follows:
- Personal allowance: The first £12,570 of income is tax-free.
- Basic rate: Income between £12,571 and £50,270 is taxed at 20%.
- Higher rate: Income between £50,271 and £150,000 is taxed at 40%.
- Additional rate: Income above £150,000 is taxed at 45%.
3. Calculate the tax liability based on the tax bands and rates:
- Personal allowance: No tax on the first £12,570.
- Basic rate: £9,300 - £12,570 = £0 (below the basic rate threshold).
Therefore, Pierre's income tax liability for 2021/22 is £0. He falls below the basic rate threshold and is eligible for the full personal allowance, resulting in no tax liability.