7 - BL - Tax individual Flashcards
How much is the personal savings allowance?
- Basic rate taxpayers = 0% for first £1,000
- Higher rate taxpayers = 0% for first £500
- Additional rate taxpayers - no personal savings allowance
What is the order of taxation of income?
- Non-savings
- Savings
- Dividends
What is the higher rate limit?
2022/23
37,701 to 150,000 @ 45
2023/24
37,701 to 125,140
What is the higher rate limit?
£150,000
What is the basic rate limit?
£12,570 to 37,700 @ 20%
How much is the dividend rate allowance?
First £1,000 is tax free for ALL tax payers
How are benefits in kind taxed?
- subject to income tax but not PAYE
What are qualifying loans for tax purposes?
- loan to buy an interest in a partnership
- loans to contribute to capital or make loans to a partnership
- loans to buy shares in a close company
- loans to buy shares in an employee-controlled company
These allow you to deduct interest from your income
How is relief given for pension scheme contributions?
- An amount equivalent to the pension scheme contributions made by a taxpayer during the year are deducted from their total income for that year.
What is the personal allowance for 2023/24?
£12,570. The amount is reduced by £1 for every £2 of Net Income above £100,000
How do you calculate the reduced allowance for individuals with Net income between £100,001 and £125,140?
£12,570 - (Net Income - £100,000 / 2) = reduced allowance
What is the order of taxation for different types of income?
Non-savings
Savings
Dividends
(Never say die)
When is CGT charged?
Where there is:
- a chargeable disposal,
- of a chargeable asset,
- by a chargeable person,
- which gives rise to a chargeable gain
Is there a chargeable disposal on death for CGT purposes?
No
What are the main types of asset excluded for CGT purposes?
- Principle Private Residence
- Cars
- Government securities, ISAs and life assurance policies
- GBP
Is CGT chargeable on donations to charities?
No
Is CGT chargeable on disposals to spouses?
No
Who are connected persons for CGT purposes?
- Persons lineal ancestors and descendants (including each of their spouses) 👨👧
- Companies under common control 🏭
- Partners in business 🎩🎩
What value is brought into charge for CGT if a sale is undervalue between unconnected parties?
Will still be market value unless its just a bad deal
What are the categories of allowable expenditure for CGT
- the cost price of the asset
- the incidental costs of acquisition
- Subsequent expenditure on the asset WHICH ENHANCES ITS VALUE
- Expenditure incurred in ESTABLISHING, PRESERVING OR DEFENDING TITLE to the asset
- Incidental costs of disposal
What is the Annual Exempt Amount for individuals
£6,000
Note: companies do not get an AEA
What are the rates of CGT
When income fall within the basic rate = £10%
Otherwise = 20%
If CGT takes the taxpayer out of the basic rate, then the gain is apportioned between rates.
What is the rate of CGT for Business Asset Disposal Relief?
10%
What are qualifying assets for BADR?
- all or part of a trading business
- assets used in a business that used to trade
- shares in a trading company
- shares in a company that used to trade
What are the qualifying conditions for BADR for all or part of a trading business?
- all or part of a trading business
- must be trading business
- must be owned for 2 years prior to the disposal
What are the qualifying conditions for BADR for assets used in a business that used to trade?
- business must have been owned for 2 years before it ceased to trade
- assets must have been used in business when it ceased; and
- assets must be disposed of within 3 years of the business ceasing to trade.
What are the qualifying conditions for BADR for shares in a trading company?
- trading company for 2 years before the disposal
- shares held for 2 years prior to the disposal
- the person disposing must be:
- an officer or employee of the company
- holds at least 5% of the ordinary voting shares and entitled to at least 5% of the
profits available for distribution and 5% of the assets on winding up. - for at least 2 years prior to the disposal
What are the qualifying conditions for BADR for shares in a company that used to trade?
- shares held for 2 years prior to the company cessation to trade
- the person disposing must be:
- an officer or employee of the company
- holds at least 5% of the ordinary voting shares and entitled to at least 5% of the
profits available for distribution and 5% of the assets on winding up.
for at least 2 years prior to the cessation of trade. - shares must be disposed of within 3 years of the company ceasing to trade.
Is a claim required for BADR?
Yes
What is the lifetime allowance for BADR?
£1 million
What are the conditions for Investor’s Relief?
Shares will be qualifying shares if:
- fully paid ordinary shares issued for CASH on or after 13 March 2016
- The company is (and has been since the shares were issued) a trading company or the holding company of a trading group
- At the time of issue, none of the company’s shares were listed on a recognised stock exchange
- shares held for at least 3 years from 6 April 2016 (and continuously since issue)
- the individual is NOT an officer or employee of the company
What is the rate for Investor’s Relief
10%
What is the lifetime allowance for Investor’s Relief
£10m
What assets does CGT Rollover Relief apply to?
Business:
- Land and Buildings
- fixed plant and machinery
- Goodwill
How does Rollover Relief work for CGT??
The new asset’s base cost is reduced by the gain on disposal of the replaced asset.
The whole gain must be rolled over (it is not possible to use AEA)
How does Gift of business asset (hold over) relief work for CGT?
Reduces the asset’s base cost by the donor’s gain to M.V.
What assets can Gift of business asset (hold over) relief for CGT apply to?
- Goodwill
- Assets used in business
- Shares in a trading company not quoted on a stock market
What is the value of a transfer for IHT purposes for a PET and LCT?
The amount by which the transferor’s estate is reduced.
What is the value of a transfer for IHT purposes on death?
Market Value
What IHT reliefs are available for both lifetime transfers and death estate?
- Spouse exemption
- Charity exemption
- Business property relief
- Agricultural property relief
- Political party exemption
- Exememption for gifts made for a national purpose or to maintain heritage funds
- Exemption of gifts to EBTs
- Exemption for gifts to housing associations
What assets does Business Property Relief apply to for IHT?
- a business or interest in a business
- shares in an unquoted company
- share is a quoted company (if shareholder has control)
- land, buildings, machinery or plant owner by the transferor but used for a business purpose by either a company controlled by the person or a partnership of which the person was a partner.
How long must the person have owned the assets for Business Property Relief to apply for IHT?
2 years immediately prior to the transfer.
Is Business Property Relief available for a company that consists wholly or mainly of making investments?
No
What assets attract 100% BPR for IHT?
- business / interest in a business
- shares in an unquoted company (regardless of shareholding)
What assets attract 50% BPR for IHT?
- shares in a quoted company if the shareholder has control of the company
- Land, buildings, machinery and plant used in a business
What is the condition for BPR need to be met if the person dies within 7 years of a lifetime transfer?
The property transferred still qualifies for BPR in the transferees hands when the transferor dies.
What’s the CT rate
25% main
19% smaller (profit less than 50k)
What’s the high rate limit 2023/24?
125,140
What are the dividend rates
Basic 8.75%
Higher 33.75%
Additional 39.35
