|
Part 3:
|
Applications in Social Arithmetic |
| Deductions And now the bad news. From your gross pay your employer makes deductions. The most common of these are income tax, national insurance contributions and superannuation. The rules, entitlements, percentages and amounts for these vary from year to year, so the following exercise will use a fabricated collection of information, but the procedure in 'real life' is exactly the same. Allowances is the name given to money on which the government does not demand tax. Thus GROSS INCOME - ALLOWANCES = TAXABLE INCOME The allowances which we will have in this exercise are single person allowance £3,570 (married person's allowance was abolished in the year 2000) and superannuation (here 6.5% of gross income), which is counted as an allowance. It is also, obviously, a deduction. Tax is counted as a percentage of taxable income. In this exercise we will have: Basic rate: 20% of the first £3,000, then 30% up to £40,000 of taxable income Higher rate: 40% on taxable income above £40,000 There will still be National Insurance contributions to be paid, but we will not include them here. |
