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In 2021/22, Pierre had taxable non-savings income (after deducting the personal allowance) of £3,000, £2,800 of savings income and £3,500 of dividend income.

What is Pierre’s income tax liability for 2021/22?

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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.

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