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R03 - Chapter 1 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

How is the priority of income

A

salary, invetsment incom , dividends, other

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2
Q

what is the trading allowance

A

£1,000

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3
Q

how is BIK treated

A

deducted under PAYE system

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4
Q

is property from UK taxabke

A

yes - whether its is uk or non uk resident

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5
Q

is there a property rental allowance

A

yes - 1,000

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6
Q

How is an annuity taxed

A

as savings icnoem

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7
Q

is dividends from overseas taxed

A

yes - as long uk reisdednt and domicile

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8
Q

what are the differnces ebtween self employed and meployed

A

a contract of service (employee); or
* a contract for services (self-employment)

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9
Q

How can a self employed person declare tax

A

purposes is that the expense has to
be wholly and exclusively incurred for
the purposes of the business

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10
Q

what would be the contary

A

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.

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11
Q

can a employee declare work house expenses

A

yes, and that is £6

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12
Q

what NICS do self emoployed pay

A

class 4 NICs at
6% on profits between
£12,570 and £50,270 a
year.

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13
Q

what is paid gross in terms of intrrest

A

OEIC, invetsment trusts, banks and buliding scoiteus, distribution from unit trusts

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14
Q

what is the taxation of annuities

A

basic rate of 20%

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15
Q

hiow is interesthow do you gross up

A

divide by 0.8

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16
Q

how is dividend income recieved

A

as gross income

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17
Q

how to calculate tax income

A

minus up tax relief - minus deuct allowance

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18
Q

what qualifies by tax relief

A

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

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19
Q

is an ninterest oayment an allowable expensie

A

yes

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20
Q

what ar ethe qualifying purposes for th eloan

A

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).

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21
Q

is relief given to share purchase loans to companies

A

yes - if it is aquiring shares or making a oan

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22
Q

is a partnership invetsment given relief

A

yes, avaliabel to a partenr who pays interest on a loan

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23
Q

with IHT how can this be paid

A

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

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24
Q

what is gift aid

A

Gift aid is intended to encourage charitable giving by giving
tax relief for donations

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25
can you recover taxtaion i fdonated to charity
yes, 20%
26
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
27
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
28
how is a pension tazes
relief at source relief by making a xlaim net pay arrangement
29
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
30
can someone over 75 contribut to a pension
no
31
what is th emaxium amount one individual can claim tax relief
is greater than 3600
32
what is the annual contribution to a peniosn
60,000
33
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
34
what is a net pay arrangement
Employees’ payments to an occupational pension scheme are usually deducted from pay before calculating tax
35
what is afring ebeneifit
employee beneift
36
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
37
is cash taxed
ye sthe cash equilavent of the beneift
38
Green transport
no tax
39
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
40
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
41
is there tax chatge on accomdation
yes if it is free or very low -= a beneifit in kind
42
are cash vouchers taxed
These are treated as earnings for tax purposes.
43
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.
44
what is a credit token
company credit card provided by an employer to an employee.
45
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.
46
is PMI taxable
yes
47
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
48
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
49
who is elligble to perosnal allowance
uk citizens - countries in the eea - self empiyed - corwn or misstionary socity
50
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
51
when does teh pa reduce to nil
125,140 - double 12570 plus 100,000
52
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
53
how much is blind persons allowance - 3070
54
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
55
when do you loose chiuld beneifit
over 80,000
56
if both partners earn over 60,00 - what hapens
one with the higher incme - col,ected by self assement
57
how much is child benifit
25.60 a week first chilf second child - 16.95
58
how is a student loan collected
Under PAYE
59
who is taxed under the bare trust
beneficary - their income - beneficary liable to tax - psa can be claimed as well as dividend allowance
60
trusts for vukerable
minro + diabsled
61
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).
62
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
63
to get details of icnome tax -w hat form is used
r185 form
64
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.
65
if the beneificary is a non tapayer - hwo may this income be chared
they may use the psa
66
what if the beeneiociary is an ADR
then they would have a furtehr liability
67
what is the dividends dfrom shares in unit trusts
same as normal + £500 allowance
68
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
69
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
70
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.
71
what happens in teh settlor intrestd trust
t the law treats trust income as if it were the settlor’s income.
72
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

R03 - Chapter 1 (13 decks)

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