Chapter 10 Flashcards
Fiscal Year
Same as the tax year
Individuals and trusts subject to income tax
6 April - 5 April
Financial Year
Companies subject to UK corporation tax on profits + VAT
1 April - 31 March
Self Assessment
Some individuals need to fill in a self assessment tax return:
- Self employed individuals
- Individuals with capital gains in the year
- Taxpayers with other income, such as rental, savings or dividends
Deadlines:
- 31 October of fiscal year for paper suvmission
- 31 January of the fiscal year for online submission
- 31 January deadline for payment of tax due
PAYE
Pay As You Earn
Tax is calculated at source from gross income and deducted to form net pay
Residence
Where someone is physically present during fiscal year
Nothing to do with nationality
Automatic Overseas Resident
If any of these conditions are met, the individual is an overseas resident (no UK tax):
1. Present in the UK for fewer than 16 days in current fiscal year
2. Not present in the UK during the last 3 fiscal years and present in the UK for fewer than 46 days in the current fiscal year
3. Work full time overseas, and spent fewer than 91 days in the UK, and spent more than 30 days working in the UK
Automatic UK Resident
If none of the Automatic Overseas Resident tests apply:
1. Present in UK for at least 183 days in a fiscal year
2. Their only home (or main address) is in the UK (available for use more than 91 days, used for at least 30 days)
3. They work full time in the UK
Sufficient Ties Test
If none of the Automatic Tests (UK / Overseas) apply, the more ties the individual has to the UK, the more likely it is they will deemed to be a UK resident (and pay UK tax):
- A family tie
- An accomodation tie
- A work tie
- A 90 day tie
Domicile
Not the same as residence
Where the individual considers “home” country to be
Domicile of Origin
Acquired from father (or mother)
Effectively by birth
Domicile of Choice
Applies from age 16, relates to emigration
Leaves country of domicile and settle in another country
Deemed Domicile
If an individual is resident in the UK for any 15 out of 20 consecutive years
UK Resident & Domiciled
Taxable by the UK on their worldwide income as it arises
Does not have to be remitted to the UK to be taxable
Assume for questions unless otherwise stated
UK Resident but Not UK Domiciled
UK income taxable as it arises
Foreign income < £2k automatic remittance
Foreign income >= £2k choose to pay on arising or remittance
Overseas Resident
Taxable on their UK income as it arises
Overseas income is not subject to UK tax
Remittance
Only have to pay tax on income if you bring it into a country and spend it in that country
If you don’t bring it in, then you don’t need to pay tax in that country
Arising
Declare and pay tax in the country, e.g. the UK
Taxable Income
- Non-savings income, e.g. employment
- Savings income, e.g. interest or life annuity
- Divident income
Personal Allowance
Tax free income against any of the taxable income sources up to $12,570
For those earning over £100,000, personal allowance will reduce by £1 for every £2, goes to nil above £125,140
Personal Savings Allowance
Only for savings income
Basic rate tax payer = £1,000
High rate tax payer = £500
Additional rate tax payer = £0
Personal Dividend Allowance
Only for dividend income
All tax payer rates: £1,000
Tapering
Reduction in tax allowance as income increases
Only applies to Personal Allowance limits
Tax Calculation Order
- Remove all allowances
- Non-savings income allowance
- Savings income allowance
- Dividends income allowance
Basic Rate Tax
Taxable income <= £37,700
Non-savings rate = 20%
Savings income = 20%
Dividends = 8.75%
