The proforma for calculating an individual’s tax liability is very important. The method for arriving at the tax due is set out step by step in ITA 2007, s 23. This is illustrated in Proforma 1 ― income tax calculation and is explained in words below.

The tax software will calculate the tax due automatically based on the entries made on the tax return, however, it is important to know the principles of the income tax computation in order to check it is correct.

The calculation for the tax years 2023/24 to 2027/28 is modified where these include transition profits from 2023/24 due to basis period reform. This is discussed below.