Business Individual Tax

Question 1

What are the 7 steps to business tax calculation?

Answer 1

1. Calculate total income
2. Deduct reliefs (qualifying loans, pension contributions) (net income)
3. Deduct personal allowance (taxable income)
4. Split into non-savings, savings, and dividends
5. Calculate if personal savings is available
6. Apply tax rates
7. Add together amount of tax calculated

Question 2

What is included in total income?

Answer 2

Earnings

Dividends

Benefits in kind

Interest from savings accounts

Question 3

What 2 things do you deduct to find net income?

Answer 3

Interest paid out on qualifying loans

Pension scheme contributions

Question 4

What are the qualifying loans for the net income stage?

Answer 4

To buy interest in a partnership

To contribute to partnership capital or make a loan to a partnership

Loans to buy shares in a closed company

Loans to buy shares in an employee controlled company or invest in a CO-OP

Question 5

What is the personal allowance for 24/25?

Answer 5

12,570

Question 6

Do you deduct personal allowance from the net income or total income?

Answer 6

Net

Question 7

At what point does your personal allowance start getting reduced (e.g., how high does your net income have to be)

Answer 7

100K

Question 8

How high does your net income have to be, so that you won’t be eligible for a personal allowance anymore?

Answer 8

125,140

Question 9

By how much is the personal allowance reduced by after you have a net income of 100?

Answer 9

1 pound for every 2 pounds above 100k

Question 10

What is the formula for calculating personal allowance?

Answer 10

12,570 - (net income - 100k)/2 = reduced personal allowance

Question 11

How do you interpret the result of the reduced personal allowance formula?

Answer 11

Negative number = no allowance left

Positive number = the amount of personal allowance left

Question 12

What is the income called after the total has been calculated, net income has been subtracted and the personal allowance has been applied?

Answer 12

Taxable income

Question 13

Into what 3 categories do you split the taxable income into before you apply tax rates? (order matters)

Answer 13

Non-savings, savings, dividend

Question 14

How do you calculate the personal savings allowance?

Answer 14

0% on first 1k for basic rate payers

0% on first 500 pounds for higher rate payers

no PSA for additional rate payers

Question 15

What is the basic rate band for 2024?

Answer 15

0 - 37,700

Question 16

What is the higher rate band for 2024?

Answer 16

37,701 - 125,140

Question 17

What is the additional rate band for 2024?

Answer 17

125,140

Question 18

What is the 2024 tax rate for non-savings incomes for all 3 bands?

Answer 18

Basic: 20%

Higher: 40%

Additional: 45%

Question 19

What is the 2024 tax rate for savings income for all 3 bands?

Answer 19

Basic: 20%

Higher: 40%

Additional: 45%

Question 20

What is the 2024 tax rate for dividends income for all 3 bands?

Answer 20

Basic: 8.75

Higher: 33.75

Additional: 39.75

Question 21

How are income tax rates applied within the 3 bands?

Answer 21

First apply the lower rate of tax to the lower band

Then calculate the portion of taxable income in the next band, and apply the higher rate of tax only to the money that falls in the middling band

Then calculate the amount in the additional band, and apply the highest tax only to that proportion of money in the additional rate band

Add them all together to get the total tax liability