Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. On a net chargeable income of $132,000: the first $50,000 pays $□, the next $50,000 pays $□, the remaining $32,000 pays $□, $□ in all. Fill in each blank

1,000, 3,000, 3,200, 7,200. 50000 × 2% = 1000, 50000 × 6% = 3000, 32000 × 10% = 3200, so 1000 + 3000 + 3200 = 7200.

Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. There is also a standard rate of 15% on the income less deductions (no allowances), and the lower of the two is charged. Income $2,300,000, deductible contributions $16,000, allowance $264,000. What tax is charged? A. $325,400 B. $303,000 C. $370,280 D. $342,600 Choose the right answer

A. $325,400. Progressive: (2300000 − 16000 − 264000) band by band, 325400; standard: (2300000 − 16000) × 15% = 342600; the lower is 325400.

Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. Net chargeable income $457,000. Everything at 17% makes $□; the four lower bands charge $□ less, so the tax = $□. Fill in each blank

77,690, 18,000, 59,690. 457000 × 17% = 77690; the first four bands of 50000 charge 50000 × (15% + 11% + 7% + 3%) = 18000 less; 77690 − 18000 = 59690. Band by band gives 59690 too.

Percentages (II) · Ages 13–14

Salaries tax

Allowances off first, then tax band by band.

How to do it

Method

Allowances off first, then tax band by band

50000 × 2% + 50000 × 6% + 30000 × 10% = 7000

Another way

Top rate, less the savings

130000 × 10% − 50000 × 8% − 50000 × 4% = 7000

In full

Salaries tax isn't charged on the whole year's income: allowable deductions (a pension contribution, say) and allowances come off first, and what is left is the net chargeable income. Progressive rates go band by band, each band at its own rate only. Say the first $50000 is taxed at 2%, the next $50000 at 6% and the rest at 10%, on a net chargeable income of $130000. One way, band by band: 50000 × 2% + 50000 × 6% + 30000 × 10% = 1000 + 3000 + 3000 = $7000. Another, everything at the top rate, less what the lower bands save: 130000 × 10% − 50000 × 8% − 50000 × 4% = 13000 − 4000 − 2000 = $7000. The usual slips: the whole income at the top rate, or forgetting the allowances. Some systems also have a standard rate, on the income before allowances, and charge the lower of the two.

Worked examples

Have a go first, then open each one for the answer and the working.

Example 1
Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. On a net chargeable income of $132,000: the first $50,000 pays $, the next $50,000 pays $, the remaining $32,000 pays $, $ in all.
Fill in each blank
Show the answer and working
Answer: 1,000, 3,000, 3,200, 7,200
50000 × 2% = 1000, 50000 × 6% = 3000, 32000 × 10% = 3200, so 1000 + 3000 + 3200 = 7200.
Example 2
Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. There is also a standard rate of 15% on the income less deductions (no allowances), and the lower of the two is charged. Income $2,300,000, deductible contributions $16,000, allowance $264,000. What tax is charged?
- A. $325,400
- B. $303,000
- C. $370,280
- D. $342,600
Choose the right answer
Show the answer and working
Answer: A. $325,400
Progressive: (2300000 − 16000 − 264000) band by band, 325400; standard: (2300000 − 16000) × 15% = 342600; the lower is 325400.
Example 3
Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. Net chargeable income $457,000. Everything at 17% makes $; the four lower bands charge $ less, so the tax = $.
Fill in each blank
Show the answer and working
Answer: 77,690, 18,000, 59,690
457000 × 17% = 77690; the first four bands of 50000 charge 50000 × (15% + 11% + 7% + 3%) = 18000 less; 77690 − 18000 = 59690. Band by band gives 59690 too.

Practice questions to try

Try these 5; the answers are at the end. For a whole worksheet, see VIP worksheets below.

1.Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. On a net chargeable income of $67,000, salaries tax = $
Answer:
2.Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. On a net chargeable income of $96,000, the salaries tax is $16,320.
True or false?
Answer:
3.Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. On a net chargeable income of $104,000: the first $50,000 pays $, the next $50,000 pays $, the remaining $4,000 pays $, $ in all.
Fill in each blank
Answer:
4.Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. A year's income of $408,000, $9,000 of deductible pension contributions and a $264,000 allowance: salaries tax = $
Answer:
5.Net chargeable income is taxed at 2% on the first $50,000, 6% on the next $50,000, 10% on the next $50,000, 14% on the next $50,000 and 17% on the rest. There is also a standard rate of 15% on the income less deductions (no allowances), and the lower of the two is charged. Income $1,640,000, deductible contributions $18,000, allowance $132,000. What tax is charged?
- A. $223,500
- B. $243,300
- C. $257,740
- D. $235,300
Choose the right answer
Answer:

All the answers

1. 2,020
2. False
3. 1,000, 3,000, 400, 4,400
4. 7,500
5. D. $235,300

Free worksheet: Salaries taxWorking out, multiple choice and word problems, with answers and working, to print or save as a PDF

VIP practice notes and papers

Aimed at tests and exams: questions on this topic, new every time, to print or save as a PDF.

Practice notes: The key point, worked examples step by step, then questions of the same kind to follow, hints fading
Practice paper: Set out in parts like a school paper, marked, with answers and full working

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