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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
Q

can you recover taxtaion i fdonated to charity

A

yes, 20%

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26
Q

how can one provide tax efficent purposes for charity

A
  • Employees can make regular gifts to charity of any amount
    in a tax-efficient manner through their employer’s payroll
    system - under PAYE
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27
Q

name the following assets that can be gifted to charity that beneofit on tax relief + CGT exeption

A

listed shares and securities
Unlisted shares - aim
units in auythroised unit trusts
OEICS
foreign collective inbestment schemes
freehold + leashold property

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28
Q

how is a pension tazes

A

relief at source
relief by making a xlaim
net pay arrangement

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29
Q

what is a relievable pension

A

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
Q

can someone over 75 contribut to a pension

A

no

31
Q

what is th emaxium amount one individual can claim tax relief

A

is greater than 3600

32
Q

what is the annual contribution to a peniosn

A

60,000

33
Q

how many years can someone loook back to conbtribute mpre to a peniosn

A

three years - but they must have already been a contributor - cant have someone who hasnt contrib uted to go back three tax years

34
Q

what is a net pay arrangement

A

Employees’ payments to an occupational pension scheme
are usually deducted from pay before calculating tax

35
Q

what is afring ebeneifit

A

employee beneift

36
Q

what is the basis of taxation regarding this

A

Any benefits provided by the employer,
employment, to employees, their family or members of their
household are treated as earnings of the employment

37
Q

is cash taxed

A

ye sthe cash equilavent of the beneift

38
Q

Green transport

A

no tax

39
Q

how are company vans taxed

A

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
Q

what is a benefical loan

A

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
Q

is there tax chatge on accomdation

A

yes if it is free or very low -= a beneifit in kind

42
Q

are cash vouchers taxed

A

These are treated as
earnings for tax purposes.

43
Q

what baout non cash vouchers

A

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
Q

what is a credit token

A

company credit card provided by
an employer to an employee.

45
Q

is taking over an employees liability taxabkle

A

yes - e.g Similarly, when an employer settles the accountancy or other
professional fees of the employee, these will usually be
taxable.

46
Q

is PMI taxable

A

yes

47
Q

what is exmdpt from tax

A

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
Q

personal allowance

A

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
Q

who is elligble to perosnal allowance

A

uk citizens - countries in the eea - self empiyed - corwn or misstionary socity

50
Q

what about if one os paying tax on the remittance basis

A

not entitled
to personal allowances except if their unremitted overseas
income for the year is less than £2,000

51
Q

when does teh pa reduce to nil

A

125,140 - double 12570 plus 100,000

52
Q

what is the personal allowance trap

A

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
Q

how much is blind persons allowance - 3070

A
54
Q

what is the high icnome child beneifit

A

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
Q

when do you loose chiuld beneifit

A

over 80,000

56
Q

if both partners earn over 60,00 - what hapens

A

one with the higher incme - col,ected by self assement

57
Q

how much is child benifit

A

25.60 a week first chilf
second child - 16.95

58
Q

how is a student loan collected

A

Under PAYE

59
Q

who is taxed under the bare trust

A

beneficary - their income - beneficary liable to tax - psa can be claimed as well as dividend allowance

60
Q

trusts for vukerable

A

minro + diabsled

61
Q

A disabled person refers to someone who is eligible for any
of the following benefits:

A
  • 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
Q

Life interest and interest possesin trusts are taxed by:

A
  • 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
Q

to get details of icnome tax -w hat form is used

A

r185 form

64
Q

Tax on the beneficiary

A

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
Q

if the beneificary is a non tapayer - hwo may this income be chared

A

they may use the psa

66
Q

what if the beeneiociary is an ADR

A

then they would have a furtehr liability

67
Q

what is the dividends dfrom shares in unit trusts

A

same as normal + £500 allowance

68
Q

do trustees beeneift from a psa in a discretionaru trust

A

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
Q

what is teh rate for divdiends to trustees in discretioanry

A
  • 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
Q

what happens when a n trustees of a discretionary trust make an income
distribution to a beneficiar

A

e trust income and will be paid out with a 45% tax credit
in all cases.

71
Q

what happens in teh settlor intrestd trust

A

t the law treats trust income as if it
were the settlor’s income.

72
Q

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.

A

yes

R03 - Chapter 1 (13 decks)

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