Finance · Guided Practice
Deductions
7 questions with answers and video solutions. Try each one before revealing the answer.
Student loan repayments are of any income above a year.
Calculate her annual student loan repayment.
Answer
Calculate her monthly pension contribution.
Answer
Her monthly deductions are income tax , National Insurance and pension .
Calculate her monthly net pay.
Answer
Over the year she pays income tax, National Insurance and in pension contributions.
Calculate her annual net pay.
Answer
You must refer to the information on 'Deductions from salaries' given in the pre-release material when answering this question.
Sophie starts a job selling mobile phones. Her company provides the following financial benefits at the end of each month:
- Salary: £1000 per month
- Commission: £20 for each mobile phone sold during the month
- Pension scheme: Sophie pays 2.5% of her monthly earnings (salary and commission) before tax into her pension fund. The company contributes another 6.5% of the same monthly earnings.
Sophie expects to sell 150 mobile phones per month.
(a) Calculate how much income tax Sophie expects to pay each year.
Sophie's pension fund earns an annual effective rate of interest of 10%.
(b) Calculate the expected value of Sophie's pension fund immediately after the third pension contribution is made.
Sophie has the choice to leave the company pension scheme.
(c) State one reason why Sophie would not leave the company pension scheme.
Answer
(a) Taxable income: £46,800 per year. Tax payable: £7667.67.
(b) £1088.63
(c) e.g., It is important to save to provide an income in retirement when Sophie is not working OR the employer's pension contribution is an extra part of the financial package which Sophie will not receive if she does not join the scheme.
You must refer to the information on 'Deductions from salaries' given in the pre-release material when answering this question.
Alaina earns a gross annual salary of £24,960. She pays 8.2% of her gross annual salary into her pension and pays £82.56 National Insurance per month.
Calculate her net monthly salary after all deductions.
Answer
£1656.41
You must refer to the information on 'Deductions from salaries' given in the pre-release material when answering this question.
In the 2023/24 tax year, Tom was paid a gross salary of £4500 per month for 12 months, from the 6 April 2023. His annual income tax deduction is £10,718.48. Tom has opted out of paying any pension contributions.
(a) Calculate Tom's net annual salary for the 2023/24 tax year, after all deductions including National Insurance.
The Consumer Price Index (CPI) in April 2022 was 119.0 and in April 2023 was 128.3.
In April 2022, Tom's gross monthly salary was £4200. In April 2023, his gross monthly salary was increased to £4500.
(b) Determine whether Tom's gross monthly salary increased in line with the CPI.
Answer
(a) Total NI contribution is £4409.22. Net annual salary is £38,872.30.
(b) The CPI change is 1.078... (an increase of 7.8%). Tom's salary increase is 1.071... (an increase of 7.1%). No, since 7.1% is less than the change in CPI.