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F6 Taxation > 2 Basic income tax computation > Flashcards

2 Basic income tax computation Flashcards

1
Q

Who are assessable persons?

A

All individuals, including children, are chargeable to income tax.

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2
Q

What are residents of the UK taxed on?

A

Worldwide income

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3
Q

How is income treated for married couples?

A

Generally, income generated from assets jointly owned is split 50:50 between spouses regardless of the actual percentage ownership

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4
Q

How can you change the percentage of ownership in a marriage in relation to income from assets?

A

Where jointly owned assets are held other than in a 50:50 ratio, an election can be made to HM Revenue & Customs (HMRC) for the income to be taxed on the individual spouses according to their actual percentage ownership.

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5
Q

What is the order of income?

A

Trading income, employment income, property income, pension income, savings income, UK dividends

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6
Q

What are the sources of income categorised as?

A

Non-savings income, savings income or dividend income

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7
Q

What does non savings income compromise of?

A

Trading income, employment income, pensions income and property income.

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8
Q

What are property income be?

A

Property income is typically rental income, but also includes other items such as the income element of a premium on granting a short lease.

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9
Q

What are sources of investment income?

A

Savings income and dividend income

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10
Q

What income is exempt?

A

Interest from NS&I, Gambling and lottery winnings, income from an ISA

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11
Q

What is the personal allowance for 16/17?

A

£11,000

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12
Q

What can the personal allowance not be set against?

A

Capital gains

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13
Q

How do you reduce a persons personal allowance if earning over £100,000.

A

Net income - gift aid - personal pension contributions = net income. net income -100000 *50%.

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14
Q

What is the basic rate band for 16/17?

A

£32,000

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15
Q

What percentages are used for non savings income?

A

20%, 40%, 45%

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16
Q

Is the ANI exceeds £xxxxxx the personal allowance is reduced to Nil

A

£122,000

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17
Q

What is the marriage allowance?

A

The marriage allowance (MA) allows a spouse or civil partner to elect to transfer a fixed amount of the personal allowance to their spouse/civil partner.

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18
Q

What might the marriage allowance be referred to?

A

The MA may also be referred to as the transferable amount of the PA.

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19
Q

When is the marriage allowance available?

A

The MA is available provided neither spouse (or civil partner) is a higher rate or additional rate taxpayer.

20
Q

What percentage of the personal allowance is given to the spouse?

A

10%

21
Q

What is the maximum benefit of the marriage allowance?

A

£220

22
Q

How do you work out the maximum saving of the marriage allowance?

A

Unused personal allowance x basic rate income tax

23
Q

When must the marriage allowance be claimed for during the tax year?

A

By 5th April 2017

24
Q

Do you need to reapply each year for the marriage allowance?

A

No

25
Q

When can you claim marriage allowance for?

A

Within 4 years by April 2021

26
Q

What is income tax payable?

A

The final tax bill to be paid via self-assessment after deducting, tax already paid on employment income (PAYE).

27
Q

What is income tax liability?

A

The total income tax due on the taxpayer’s total gross income, after deducting reliefs and the personal allowance.

28
Q

What relief is given for employees? (2)

A
  1. The purchase of plant or machinery by an employed person for use in his employment.
  2. The purchase of shares in a employee-controlled trading company by a full-time employee.
29
Q

What relief is given for partners? (2)

A
  1. The purchase of a share in a partnership, or the contri­bution to a partnership of capital or a loan. The borrower must be a partner in the partnership.
  2. The purchase of plant or machinery for use in the partnership, by a partner.
30
Q

How is relief given for qualifying interest payments?

A

Relief is given by deducting the amount of interest paid in a tax year from total income.

31
Q

What two ways can you get tax relief for charitable giving?

A
  1. Donations under the gift aid scheme

2. Payroll giving under the payroll deduction scheme.

32
Q

How do basic rate tax payers obtain tax relief on gift aid payments?

A

Obtain the tax relief at the time of payment, by only paying 80% of the amount of the donation.

33
Q

How do higher and additional rate tax payers obtain tax relief on gift aid payments?

A

The effect of extending the basic and higher rate bands is that income equivalent to the value of the gross donation is taxed at:
– 20%, rather than 40% for a higher rate taxpayer or
– if an additional rate taxpayer, at 20% rather than 45%.

34
Q

What is child benefit tax charge?

A

Child benefit is a tax free payment from the Government that can be claimed in respect of children.

35
Q

When does a child benefit income tax charge occur?

A

When an individual or spouse have adjusted net income of £50,000 or more.

36
Q

What percentage is charged on income between £50,000 and £60,000 for child benefit?

A

1% of each £100 of income over £50,000

37
Q

What percentage is charged on income over £60,000 for child benefit?

A

The amount of child benefit received

38
Q

When working out child benefit charge. What do you use as the income figure?

A

Adjusted net income (less gift aid)

39
Q

Under what three conditions is a individual a resident in the uk?

A
  1. Do not meet one of the automatic non-UK residence tests
  2. Meet one of the automatic UK residence tests
  3. Meet one or more of the sufficient ties tests.
40
Q

What is the procedure to determine residence?

A
  1. Check automatic non-UK residence test - if not satisfactory -
  2. Check automatic UK residence tests, if not -
  3. Determine how many sufficient ties with the UK exist, and, how many days are spent in the UK in the tax year, then use tax tables to decide status
41
Q

What is the automatic non-UK residency tests?

A

An individual is automatically not UK resident if they are ‘in the UK’ in the tax year for less than:
16 days or, 46 days and has not been a resident in the UK in any of the previous three tax years or 91 days and works full time overseas

42
Q

When is an individual automatically a resident in the UK? (3)

A

they are in the UK for at least 183 days in the tax year or

their only home is in the UK or they work full-time in the UK.

43
Q

What time does it count if the resident is in the UK for residency?

A

Midnight

44
Q

What are the five ties that HMRC determine if a UK resident?

A
  1. Family
  2. Accommodation
  3. Work
  4. Days in the UK - 90 days in the UK
  5. Country - More time here than anywhere else
45
Q

If a individual is leaving the country, what ties are relevant?

A

All five

46
Q

If a individual is arriving in the country, what ties are relevant?

A

Only the first four ties, not the country one

F6 Taxation (25 decks)

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