2024 test knowledge 3-4

Question 1

Paula is a higher-rate taxpayer who makes a charitable donation through Gift Aid. This means:
a) Paula’s basic-rate income-tax threshold will be extended by the gross amount of the gift.
b) Paula will receive immediate basic-rate tax relief on the gift.
c) the charity can recover basic- and higher-rate tax Paula paid on the gifted amount.
d) Paula will receive immediate basic- and higher-rate tax relief on the gift.

Answer 1

a) Paula’s basic-rate income-tax threshold will be extended by the gross amount of the gift.

Question 2

Juan comes from a long line of Argentinians, but now lives in the UK. After how many years of being a UK tax resident will he be deemed domicile?
a) A total of 15 years.
b) 15 of the last 20 years.
c) A total of 20 years.
d) 17 of the last 20 years.

Answer 2

b) 15 of the last 20 years.

Question 3

The starting rate of income tax applies to:
a) dividends.
b) all income for low earners.
c) pension income.
d) savings interest.

Answer 3

d) savings interest.

Question 4

Imran is self-employed. In order to be able to deduct his business expenses from his gross income, they would need to be:
a) exclusively incurred for his trade.
b) allowable by HMRC.
c) wholly and exclusively incurred for the purpose of his trade.
d) wholly, exclusively and necessarily incurred for his trade.

Answer 4

c) wholly and exclusively incurred for the purpose of his trade.

Question 5

The personal savings allowance is:
a) available to all taxpayers.
b) available only to non-taxpayers.
c) only available to basic-rate taxpayers.
d) not available to additional-rate taxpayers.

Answer 5

d) not available to additional-rate taxpayers.

Question 6

Greg is self-employed, with annual profits over the lower profits limit. Which of the following classes of National Insurance contributions will he have to pay?
a) 1 and 2.
b) Class 4 only.
c) Class 2 only.
d) 3 and 4.

Answer 6

b) Class 4 only.

Question 7

Jayne left her job in January and is about to start another. Her previous employer will have given her a:

a) P30.
b) P45.
c) P60.
d) P75.

Answer 7

b) P45

Question 8

Which of the following sources of income is not subject to income tax?
a) State pensions.
b) Redundancy payment in lieu of notice.
c) Share dividends.
d) War widow’s pension.

Answer 8

d) War widow’s pension.

Question 9

For how many days in a tax year must a person be present in the UK to be considered a UK tax resident?
a) 60.
b) 90.
c) 183.
d) 365.

Answer 9

c) 183.

Question 10

HMRC sets out a strict order in which income tax on different types of income is applied. Which of the following is third in that order?
a) Interest.
b) Dividends.
c) Earned income.
d) Chargeable gains from life assurance policies.

Answer 10

b) Dividends.

Question 11

Dan left £93,000 to his son on his death, leaving the balance of his estate to his wife Joan. At the time of his death the IHT nil-rate band was £310,000. When Joan died, she left her entire estate of £800,000 to their son, having not made any other gifts previously. On Joan’s death the IHT nil-rate band was £325,000. How much of Joan’s estate would be subject to IHT?
a) £150,000.
b) £247,500.
c) £475,000.
d) £542,000.

Answer 11

b) £247,500.

Question 12

Clare and Clive are getting married. They each have two parents and four grandparents, all of whom have agreed to give them money as a wedding gift. How much could Clare and Clive receive in total, without causing any tax problems for themselves or anyone else?
a) £10,000.
b) £20,000.
c) £40,000.
d) £80,000.

Answer 12

c) £40,000.
£5000 per parent and 2500 per grandparent.

Question 13

Gains from which of the following would be exempt from capital gains tax?
a) Corporate bonds.
b) Shares.
c) Holiday home.
d) Unit trusts.

Answer 13

a) Corporate bonds.

Question 14

Which of the following is true in relation to the residence nil-rate band (RNRB)?
a) It is available even if the deceased never lived in the property.
b) Any unused RNRB cannot be transferred to a spouse on death.
c) It applies where a main residence is left to a direct descendant of the deceased.
d) The RNRB is reduced if the value of the estate exceeds £1m.

Answer 14

c) It applies where a main residence is left to a direct descendant of the deceased.

Question 15

Alan owns shares in a small company that has share capital of £200,000, and now wants to sell them. In order to be able to claim business asset disposal relief, Alan’s shareholding must be worth at least:
a) £5,000.
b) £10,000.
c) £50,000.
d) £100,000.

Answer 15

b) £10,000. Alan must own at least 5% of the firm’s share capital to be able to claim business asset disposal relief.

Question 16

Which of the following would not be exempt or zero-rated for VAT?
a) Books.
b) Financial advice.
c) Children’s clothes.
d) Domestic water.

Answer 16

b) Financial advice.

Question 17

Which of the following would not be subject to corporation tax?
a) A small limited company.
b) A football club.
c) A limited liability partnership.
d) A housing association.

Answer 17

c) A limited liability partnership.

Question 18

Ashok made a potentially exempt transfer in January 202X but died four years and ten months later. What percentage of the IHT due on the gift would be payable?
a) 20%.
b) 40%.
c) 60%.
d) 100%.

Answer 18

c) 60%.
3-4 years: 20%
4-5 years: 40%
5-6 years: 60%
6-7 years: 80%

Question 19

By when must capital gains tax normally be paid on disposal of an asset?
a) On 31 January following the end of the tax year in which the gain is made.
b) By the end of the tax year in which the gain is made.
c) In two instalments on 31 January and 31 July following the end of the tax year in which the gain is made.
d) On 31 July following the end of the tax year in which the gain is made.

Answer 19

a) On 31 January following the end of the tax year in which the gain is made.

Question 20

Karen made a loss of £5,000 when she sold some shares, but did not make any other gains in the tax year. Assuming the capital gains tax annual exempt amount was £6,000 for that tax year, what is the total amount she could carry forward to use against gains in the following tax year?

a) £2,500.
b) £5,000.
c) £6,000.
d) £11,000.

Answer 20

b) £5,000. She can carry forward all losses but not the annual exempt amount.