2: income tax: individuals

Question 1

Allowable expenses for property income

Answer 1

Notable:
Finance costs (non-resedentiaal properties only)

Replacement of domestic items

Fixed trate deductions for motor vehicles

Leased cars - if less than 50g/km hire charge is fully allowable, if above then 15% is disallowed

Question 2

What is the rule around finance costs in relation to letting residential properties

Answer 2

20% tax reducer of the lower of three things:

The finance costs plus any bf finance costs

Property income for the tax year (after using any brought forward property losses)

Adjusted total income - the income (after losses and reliefs and excluding savings and dividend income) that exceeds the personal allowance for the tac year

Question 3

Rent a room rules

Answer 3

If gross annual rent is more than £7,500 taxpayer can choose:

Apply normal property income reules (gross rent less expenses) (default)

OR

Taxed on rental income in excess of £7,500

Question 4

Tax relief on pensions (in TT)

Answer 4

The higher of

The individuals’ relevant earnings chargeable to income tax in the year

OR

The basic amount (£3,600)

Question 5

Annual allowance for pesnions

Answer 5

£40,000 - if over then tax allowance is clawed back. Can be carried foward for 3 years if not used. Can be reduced if high earner

Question 6

Lifetime allowance (in TT)

Answer 6

Max amount that can be accumulated in a pension during an individual’s lifetime

£1,073,100

Question 7

8 disallowable expenses for trading income

Answer 7

1. Capital expenditure incl depn + legal fees (except for renewal of short lease)
2. Entertaining and gifts (unless 3 criteria)
3. General provisions (unless specific provisions)
4. Personal expenditure of sole trader including personal IT bill + NIC bill + drawings (salary)
5. Charity and political donations (unless small donation to local charity)
6. Fines and penalties (unless parking for employee)
7. Goods taken for own use
8. 15% of leased hire costs of high emission cars (>50g)

Question 8

Value of use of employer’s asset in benefit calculation for employment income

Answer 8

Higher of MV when gifted or MV when first provided less amounts already assessed as a benefit.

Question 9

Value of loan in benefit calculation for employment income

Answer 9

Lower of average method and strict method

Question 10

What are the 4 options for domicile

Answer 10

Origin (acquired at birth)

Dependency (change while a minor)

Choice (need to take steps to make UK permanent home)

Deemed domicile, if resident in the UK for 15 of the previous 20 tax years