Answer to Question #186524 in Accounting for Salman

Question

Olivia works in Sntra plc. She earns annual employment income of £15,000. Olivia uses the house belonging to her employer for personal use (not job related), she pays notional rent of £1,600 The annual value is £9,200. She has been living in the house since December 2012. The house has a costed the company £120,000 when it was first bought in January 2009 and has a market value of £185,000 in March 2021. Her employers also pay for lighting and heating expenses of the house costing £1,850 a year.

a)  Calculate the Olivia’s taxable benefit for 2020/21.

b)  What will be the Olivia’s tax benefit if the accommodation was job related?

Answer 1

Assuming year starts at 1st April;

a.) Taxable benefit for 2020/21

Item. £

Income. 15,000

Add Annualized rent. 9,200

Total taxable income. 24,200

b.) Tax benefit if accommodation was job related.

If accommodation was job related, Olivia will pay tax on annual income of £15,000.

Tax benefit is difference between tax in a.) and tax in b.)