Question

Bob lives in the UK, but works in both Germany and in the UK. In 2019 he earned 40,000 euros in Germany, and 30,000 euros in the UK. In Germany the income tax rate is 45%.

2.1. How much tax would be due from Bob in the UK on his annual income for 2019 if the UK income tax rate was 20% and any double taxation would be eliminated using ordinary credit?

2.2. How much tax would be due from Bob in the UK on his annual income for 2019 if the UK income tax rate was 50% and any double taxation would be eliminated using ordinary credit?

2.3. How much tax would be due from Bob in the UK on his annual income for 2019 if the UK income tax rate was 20% for income up to 40,000 euros and 30% for income above 40,000 euros, and any double taxation would be eliminated using exemption with progression?

Answer 1

2.1	Income	40000	30000
	Germany tax @ 45%	-18000
	UK tax @ 20%	-8000	-6000
	Tax credit (Note)	8000
	Total tax	-18000	-6000	-24000
	Note: Tax Credit would be amount of tax paid in Germany or tax amount owed in UK, which ever is higher
		Germany	UK	Total
2.2	Income	40000	30000
	Germany tax @ 45%	-18000
	UK tax @ 50%	-20000	-15000
	Tax credit (Note)	18000
	Total tax	-18000	-15000	-33000
	Note: Tax Credit would be amount of tax paid in Germany or tax amount owed in UK, which ever is higher
		Germany	UK	Total
2.3	Income	40000	30000	70000
	Germany tax @ 45%	-18000
	UK tax @ 20% & 30%	-8000	-9000
	Tax credit (Note)	8000
	Total tax	-18000	-9000	-27000
	Note: Tax Credit would be amount of tax paid in Germany or tax amount owed in UK, which ever is higher. Tax in UK is 20% upto 40,000 which is income earned in Germany. Above 40,000 income is taxed at 30% and UK income is taxed at 30% as Germany income is also considered for calculation of total income.