Ch 1: Income Tax Comp

Question 1

What is the duration of the tax year?

Answer 1

The tax year runs from the 6th April - 5th April

Question 2

What income is exempt? (4 key items)

Answer 2

• ISAs
• National savings certificates
• premium bonds
• statutory redundancy

Question 3

Qualifying loan interest is interest paid on a loan taken out for (4 things):

Answer 3

• A partner to invest in or lend to a partnership
• A partner or employee to buy plant & machinery
• An employee to invest in/ lend to a co-operative or employee controlled unquoted trading company
• An employee shareholder or >5% shareholder to invest in or lend to a close trading company in the EEA

Question 4

What are the 4 aspects to an employee lending to a co-operative?

Answer 4

1. Employee controlled
2. Unquoted
3. Trading company
4. In the EEA

Question 5

How do you calculate the reduction in PA if ANI is between than £100k-£125k?

Answer 5

1/2 (ANI - £100k)

Question 6

How do you calculate ANI?

Answer 6

Total income (NSI+SI+DI) - loss relief, eligible interest, gross personal pension contributions and gross Gift Aid contributions
*ONLY calculate if you need to reduce the PA

Question 7

How do you calculate gross gift aid?

Answer 7

x 100/80 - always assume in the exam that it is given net (would be worded as gross if applicable)
*Bands get extended as well by the gross donation

Question 8

What is the assumption for spouses and civil partnerships?

Answer 8

Income from jointly owned property, joint bank accounts, jointly owned shares are shared equally between the spouses

Question 9

How can you go against the spouses and civil partnerships assumption?

Answer 9

A declaration must be made based on actual % ownership

*Use as best tax planning as possible i.e. use PA, lowest tax rates and calculate the tax savings

Question 10

When is marriage allowance applied?

Answer 10

Only if both individuals are Basic Rate tax payers

Question 11

What does the income need to be for MA to be viable and what do you do with it?

Answer 11

Income needs to be £11,250 or less to be useful - the transferrable amount is £1,250
Take 20% of £1,250 and use against the recipients i.e. the transferee IT liability i.e. £250 as tax reducer

Question 12

What is Class 1 NIC paid on?

Answer 12

Cash - salaries, bonuses, vouchers, excess AMR (>45p/ mile)

Question 13

What NICs do you pay if self employed?

Answer 13

Class 2 and Class 4

Question 14

What do you pay Class 1A NICs on?

Answer 14

Benefits

*Employers ONLY