Chapter 1 Flashcards
How is the priority of income
salary, invetsment incom , dividends, other
what is the trading allowance
£1,000
how is BIK treated
deducted under PAYE system
is property from UK taxabke
yes - whether its is uk or non uk resident
is there a property rental allowance
yes - 1,000
How is an annuity taxed
as savings icnoem
is dividends from overseas taxed
yes - as long uk reisdednt and domicile
what are the differnces ebtween self employed and meployed
a contract of service (employee); or
* a contract for services (self-employment)
How can a self employed person declare tax
purposes is that the expense has to
be wholly and exclusively incurred for
the purposes of the business
what would be the contary
In contrast, employees have to
meet a much stricter standard –
that expenses must be wholly,
exclusively and necessarily incurred
in the performance of the employee’s
duties.
can a employee declare work house expenses
yes, and that is £6
what NICS do self emoployed pay
class 4 NICs at
6% on profits between
£12,570 and £50,270 a
year.
what is paid gross in terms of intrrest
OEIC, invetsment trusts, banks and buliding scoiteus, distribution from unit trusts
what is the taxation of annuities
basic rate of 20%
hiow is interesthow do you gross up
divide by 0.8
how is dividend income recieved
as gross income
how to calculate tax income
minus up tax relief - minus deuct allowance
what qualifies by tax relief
qualifying interest payments;
* allowable business losses;
* gifts to charities of shares and securities; and
* qualifying contributions to registered occupational pension
plans (for which relief cannot be given directly from
employment earnings) and to retirement annuity plans (in
is an ninterest oayment an allowable expensie
yes
what ar ethe qualifying purposes for th eloan
the purchase of shares in the borrower’s company or to
finance loans to the company;
* investment in a partnership;
* the purchase of plant and machinery for use in a
partnership; and
* the payment of inheritance tax (IHT).
is relief given to share purchase loans to companies
yes - if it is aquiring shares or making a oan
is a partnership invetsment given relief
yes, avaliabel to a partenr who pays interest on a loan
with IHT how can this be paid
interest is allowable - if - Relief is restricted to a period of one year from the making
of the loan.
* Relief is at the borrower’s top rate but is subject to the cap
of £50,000 or 25% of adjusted total income, whichever is
the higher.
* The borrower must be a legal personal representative of
the deceased
what is gift aid
Gift aid is intended to encourage charitable giving by giving
tax relief for donations
can you recover taxtaion i fdonated to charity
yes, 20%
how can one provide tax efficent purposes for charity
- Employees can make regular gifts to charity of any amount
in a tax-efficient manner through their employer’s payroll
system - under PAYE
name the following assets that can be gifted to charity that beneofit on tax relief + CGT exeption
listed shares and securities
Unlisted shares - aim
units in auythroised unit trusts
OEICS
foreign collective inbestment schemes
freehold + leashold property
how is a pension tazes
relief at source
relief by making a xlaim
net pay arrangement
what is a relievable pension
contribution paid to a
registered pension scheme by an individual member of that
scheme who is a relevant UK individual or, in some cases, - setting up a pension for a child
can someone over 75 contribut to a pension
no
what is th emaxium amount one individual can claim tax relief
is greater than 3600
what is the annual contribution to a peniosn
60,000
how many years can someone loook back to conbtribute mpre to a peniosn
three years - but they must have already been a contributor - cant have someone who hasnt contrib uted to go back three tax years
what is a net pay arrangement
Employees’ payments to an occupational pension scheme
are usually deducted from pay before calculating tax
what is afring ebeneifit
employee beneift
what is the basis of taxation regarding this
Any benefits provided by the employer,
employment, to employees, their family or members of their
household are treated as earnings of the employment
is cash taxed
ye sthe cash equilavent of the beneift
Green transport
no tax
how are company vans taxed
There is a taxable benefit of £3,960 for employees provided
with a company van (nil for zero-emission vans), plus £757
when van fuel is available for private journeys
what is a benefical loan
who receive interest-free or ‘cheap’
loans from their employers are taxed on the benefit they
receive from the arrangement.
The official rate of interest is
usually set in advance for the whole of the tax year and is
2.25% for 2024/25. - below this is taxed
is there tax chatge on accomdation
yes if it is free or very low -= a beneifit in kind
are cash vouchers taxed
These are treated as
earnings for tax purposes.
what baout non cash vouchers
Employees are taxed on an amount equal to
the cost of the voucher incurred by the employer, less
any amounts made good by the employee.
Some specific
types of voucher, such as childcare vouchers, are tax free
within limits.
what is a credit token
company credit card provided by
an employer to an employee.
is taking over an employees liability taxabkle
yes - e.g Similarly, when an employer settles the accountancy or other
professional fees of the employee, these will usually be
taxable.
is PMI taxable
yes
what is exmdpt from tax
IP, probision of meals - MOBILE phones - computers - long service awards - relocating expenses
home working
pension advce
workplace nurieres
liability insurance
trivial benidts - not costing more than £50
personal allowance
12570 - s deducted after calculating the
individual’s aggregate income less reliefs given by deduction
from total income. - can trasfer 10% to civil partner - tax reducer
who is elligble to perosnal allowance
uk citizens - countries in the eea - self empiyed - corwn or misstionary socity
what about if one os paying tax on the remittance basis
not entitled
to personal allowances except if their unremitted overseas
income for the year is less than £2,000
when does teh pa reduce to nil
125,140 - double 12570 plus 100,000
what is the personal allowance trap
When a person has an adjusted net income of between
£100,000 and £125,140, the effective marginal rate of income
tax is 60%
when comparining in this window - times the differnce by 0.6
how much is blind persons allowance - 3070
what is the high icnome child beneifit
An income tax charge applies to individuals who receive
Child Benefit, or whose partner receives Child Benefit, and
whose adjusted net income exceeds £60,000
when do you loose chiuld beneifit
over 80,000
if both partners earn over 60,00 - what hapens
one with the higher incme - col,ected by self assement
how much is child benifit
25.60 a week first chilf
second child - 16.95
how is a student loan collected
Under PAYE
who is taxed under the bare trust
beneficary - their income - beneficary liable to tax - psa can be claimed as well as dividend allowance
trusts for vukerable
minro + diabsled
A disabled person refers to someone who is eligible for any
of the following benefits:
- Attendance Allowance;
- Disability Living Allowance (DLA) (either the care
component at the middle or highest rate, or the mobility
component at the highest rate); - Personal Independence Payment (PIP);
- Constant Attendance Allowance; or
- Armed Forces Independence Payment (AFIP).
Life interest and interest possesin trusts are taxed by:
- Tax on savings income is at 20% – the personal savings
allowance is not applicable to trustees
dividends is at 8.75% in 2024/25
Tax on other income received by the trustees is at 20%
t
to get details of icnome tax -w hat form is used
r185 form
Tax on the beneficiary
must add the trust income from form R185 to
their other income for that tax year in order to calculate their
liability to income tax.
if the beneificary is a non tapayer - hwo may this income be chared
they may use the psa
what if the beeneiociary is an ADR
then they would have a furtehr liability
what is the dividends dfrom shares in unit trusts
same as normal + £500 allowance
do trustees beeneift from a psa in a discretionaru trust
no - however - anything below 500 - special allowance - cant have more than 5 - minimum 100 a trusrt - if this esxceed this is taxed in full
what is teh rate for divdiends to trustees in discretioanry
- The rate applicable to trustees is 39.35% for dividends and
45% for other forms of income – the same rates that apply
to an additional-rate-taxpaying individual
what happens when a n trustees of a discretionary trust make an income
distribution to a beneficiar
e trust income and will be paid out with a 45% tax credit
in all cases.
what happens in teh settlor intrestd trust
t the law treats trust income as if it
were the settlor’s income.
is thsi true - If a settlor’s minor unmarried child receives more than £100 of income from the trust, it is treated as the settlor’s income for tax purposes.
yes
