1 Flashcards
When does the tax year run?
6th April- 5th April
What is income tax?
Tax paid on income received during a tax year
What are the three elements of taxable income?
Non-savings income (e.g. salary)
Non-dividend income (e.g. interest)
Dividend income
What non-dividend savings income is paid NET of basic (20%) rate
o Interest paid by companies (corporate bonds, AUTs – authorised unit trusts, OEICs/ICVCs)
o Income from annuity
What non-dividend savings income are paid GROSS?
o Gilts (can elect to receive net)
o NS&I (national savings and investments) products
o Bank and building society
o Proceeds on qualifying life assurance policies
o Dividends
What is the difference between NET and GROSS
Net means taxes and charges have already been accounted for whereas GROSS means that taxes and charges need to be paid.
What’s the process for calculating income tax payable?
1) Add all income (gross)
2) Deduct tax free personal allowances
3) Calculate the tax due on the remaining taxable income after allowances.
What is National Insurance?
employed or self employed people make payments towards benefits
What national insurance do employees pay?
Class 1: on earnings
What is national insurance does an employer pay?
Class 1A: on certain employee benefits
Class 1B: when employer in PAYE agreement with HMRC
What is national insurance does someone who is self-employed pay?
Class 2 / Class 4
What is national insurance does someone who is making voluntary contributions pay?
Class 3
What is capital gains tax paid on?
• Paid on: gains on ‘chargeable assets’ (e.g. shares, investment property) sold during a tax year
What is exempt from Capital Gains Tax?
Exempt assets:
o Main home
o Cars
o Assets held in ISAs
o National Savings & Investment Certificates
o Betting and lottery winnings
o UK government and most corporate debt (not related to equity)
o Enterprise investment scheme (EIS) and Seed enterprise investment scheme (SEIS) shares
o Foreign currency for personal use, not for gain
When is CGT paid?
• Paid on 31 January following the tax year of the disposal
what is a planning strategy for reducing CGT using ones spouse? But what are negatives to this?
o Spouse transfer can transfer to spouse and share the tax
capital losses can not be shared
What is a planning strategy for reducing CGT that includes multiple years?
o Phased disposal disposals spread over several fiscal years and each year would be able to use an annual exemption
what is Bed and Breakfast in terms of CGT and what is now in place to stop this?
o Bed and breakfast (30 day rule) realise a gain by selling an asset and using annual exemption to offset the gain and then re-purchase the asset. Tax man now wise to this so can’t buy an asset back within 30 days.
When must hardcopy/ electronic tax returns be submitted and paid?
o Hardcopy
Submitted by 31st October following the end of the tax year
o Electronic
Submitted by 31st January following the end of the tax year
o Either way the bill must be paid by the 31st January following the end of the tax year.
What are the three categories of residency?
Part A - automatically non-resident
Part B - Automatically resident Part C - Sufficient ties test
Describe the conditions for being a part A resident?
o Visit UK for fewer than 16 days in the tax year; or
o Non-resident in previous three tax years and visit UK for fewer than 46 days in the tax year; or
o Work full-time overseas and visit the UK for fewer than 91 days in the tax year (with no more than 30 days working in the UK)
Describe the conditions for being a part B resident?
Part A doesn’t apply…
o Present in the UK for 183 Days or more in the tax year; or
o Own a home in the UK for at least 91 days and lived there for at least 30 days in the tax year; or
o Work full-time in the UK
How would someone get listed as a part C resident and what would then happen?
sufficient test ties (neither part A nor part B apply, and…)
o Further tests based on family, work and accommodation
What is domicile?
• Domicile is where a person has their permanent home
