Chapter 12 - Personal tax and investment advice

Question 1

Pamela is emigrating to New Zealand and plans to leave on 5 April 2022. She has a share portfolio that would generate a large capital gains tax liability if encashed. Assuming that Pamela remains non-UK resident and she wants to minimise her tax liability, she would be best advised to postpone disposal of the shares until at least 6 April:

Select one:

a. 2027.
b. 2023.
c. 2032.
d. 2025.

Answer 1

a. 2027.

chapter reference 12B6A

Question 2

Juan, a higher-rate taxpayer, has sold shares making a capital gain of £36,000 for 2021/22. Assuming he has made no losses or other gains in this tax year, what is his liability and what is the latest date that it must be paid to HMRC?

Select one:

a. £4,800 no later than 31 July 2022.
b. £4,800 no later than 31 January 2023.
c. £4,740 no later than 31 July 2022.
d. £4,740 no later than 31 January 2023.

Answer 2

d. £4,740 no later than 31 January 2023.

chapter reference 12B2F

Question 3

Jeremy, who is age 49 and self-employed, has profits of £72,000. What is his Class 4 National Insurance contributions liability for 2021/22?

Select one:

a. £4,958.90.
b. £4,524.30.
c. £4,097.78.
d. £5,318.84.

Answer 3

c. £4,097.78.

chapter reference 12A2

Question 4

For which of these individuals, each with £10,000 to invest, would an ISA provide the greatest tax benefit?

Select one:

a. Beryl, retired, whose income comprises £5,800 State pension, £2,800 private pension and £3,700 deposit account interest.
b. Malcolm, a director, whose income comprises £45,000 salary and £6,000 dividends from his company, plus £2,000 deposit account interest.
c. Fred, an employee whose income comprises £13,500 salary and £900 deposit account interest.
d. Sanjay, a director whose income comprises £77,000 salary and £1,500 dividends from his company, plus £1,500 deposit account interest.

Answer 4

b. Malcolm, a director, whose income comprises £45,000 salary and £6,000 dividends from his company, plus £2,000 deposit account interest.

chapter reference 12B3B

Question 5

Nathan, who is a higher-rate taxpayer, sold his company in August 2021 for £1.6 million. He purchased the business 20 years ago for £650,000 and was the controlling director holding all the shares. Assuming he made no other chargeable gains or losses in 2021/22, how much capital gains tax will be payable as a result of the sale?

Select one:

a. £190,000.
b. £93,770.
c. £187,540.
d. £95,000.

Answer 5

b. £93,770.

chapter reference 12B2D

Question 6

A National Savings and Investments product pays an annual equivalent rate of 2.1%. The equivalent interest rate in a taxable investment for a higher-rate taxpayer would be:

Select one:

a. 5.25%.
b. 2.63%.
c. 3.50%.
d. 2.94%.

Answer 6

c. 3.50%.

chapter reference 12B3A

Question 7

When considering business asset disposal relief for capital gains tax purposes, the:

Select one:

a. asset must have been owned for at least one year before the disposal.
b. individual must be an employee of the company and hold at least 10% of the voting shares.
c. reduced rate of capital gains tax applies to lifetime gains of £1 million or less.
d. individual must be a director of the company and hold at least 20% of the voting shares

Answer 7

c. reduced rate of capital gains tax applies to lifetime gains of £1 million or less.

chapter reference 12B2D

Question 8

Hazel received a gift of £100,000 in May 2021. She has fully utilised her ISA allowance for 2021/22 and would like to invest the £100,000 in a tax-efficient manner. If she has a total income of £7,500, the most tax efficient investment for Hazel would be a[n]:

Select one:

a. non qualifying UK life assurance policy.
b. endowment policy.
c. deposit account.
d. equity unit trust.

Answer 8

c. deposit account.

chapter reference 12B1A

Question 9

Wang Jin is 40 years old and an employee who is paid monthly. She earns £4,500 during August 2021. What amount of employee’s Class 1 National Insurance contributions are payable for August 2021?

Select one:

a. £413.26.
b. £411.66.
c. £407.04.
d. £444.36.

Answer 9

a. £413.26.

chapter reference 12A2

Question 10

Ranjeeta holds numerous investments. Which products will always produce a tax-free income for her?

Select one:

a. Her pension savings and her deposit account.
b. Her unit trusts, investments trusts and OEICs.
c. Her ISA and her premium bonds.
d. Her endowment policy and her friendly society policy.

Answer 10

c. Her ISA and her premium bonds.

chapter reference 12B1B

Question 11

Phil is 45 and employed. What is his National Insurance contribution liability if he earns £1,050 per week?

Select one:

a. £95.62 per week.

Correct, chapter reference 12A5B

b. £93.96 per week.
c. £103.92 per week.
d. £92.30 per week.

Answer 11

a. £95.62 per week.

chapter reference 12A5B

Question 12

Carl is 56 and has earnings of £45,000. He has a pension plan valued at £300,000. He wants to take tax-free cash and an additional income of £10,000 from the pension fund. What is his income tax liability for 2021/22?

Select one:

a. £11,000.
b. £8,486.
c. £9,432.
d. £6,486.

Answer 12

c. £9,432.

chapter reference 12A5A

Question 13

Donna is a higher-rate taxpayer in 2021/22. In the same tax year she surrenders an offshore bond, making a gain of £52,000 and an onshore bond, making a gain of £24,000. What is the total income tax liability on these surrenders assuming they do not alter her marginal rate of income tax and the personal savings allowance has already been utilised?

Select one:

a. £30,400.
b. £15,200.
c. £33,200.
d. £25,600.

Answer 13

d. £25,600.

chapter reference 12B5B/12B5E

Question 14

Lucy is 77 and has never married. In 2021/22 she has pension income of £10,500 and receives interest of £6,000 from her savings account. What is the highest rate of tax that she is liable for on her current level of savings income?

Select one:

a. 20%.
b. 0%.
c. 10%.
d. 40%.

Answer 14

b. 0%.

chapter reference 12A5A

Question 15

When investment income is received directly rather than through a UK life company, which category of taxpayer will be treated most favourably?

Select one:

a. Higher-rate taxpayers.
b. Additional-rate taxpayers.
c. Non-taxpayers.
d. Basic-rate taxpayers.

Answer 15

c. Non-taxpayers.

chapter reference 12B5A

Question 16

Heidi, 30, earned £1,026 in the last week of July 2021. What is the total employer and employee class 1 National Insurance contributions due for that week?

Select one:

a. £213.27.
b. £264.71.
c. £118.13.
d. £95.14.

Answer 16

a. £213.27.

chapter reference 12A5B

Question 17

Peter is a widower who has made no lifetime transfers and he has lived in a care home since the passing of his wife. He died in 2021/22 with an estate of £600,000. He left a picture worth £40,000 to the National Gallery and split the rest of his estate equally amongst his four nephews. Peter’s deceased wife’s IHT nil rate band was fully used at the time of her death. What is the IHT due on Peter’s estate?

Select one:

a. £94,000.
b. £99,000.
c. £84,600.
d. £110,000.

Answer 17

c. £84,600.

chapter reference 12A5D

Question 18

Three and a half years ago, Janice, a higher-rate taxpayer, invested £30,000 in a non-qualifying UK life assurance bond. What maximum withdrawal, if any, could Janice make without incurring any tax charge in the current tax year?

Select one:

a. £4,500.
b. £1,500.
c. £6,000.
d. Nil.

Answer 18

c. £6,000.

chapter reference 12B5C

Question 19

Gerard, an additional-rate taxpayer, sold his shares in ABC Ltd in July 2021 when he retired from his role as the Managing Director. He had held the position for the last 10 years and the shares amounted to 10% of the voting stock. After all allowances Gerard realised a capital gain of £1.2m. The capital gains tax owed can be reduced by:

Select one:

a. claiming business asset disposal relief.
b. paying the proceeds into a pension.
c. investing the proceeds into shares listed on the Alternative Investment Market.
d. making a negligible value claim.

Answer 19

a. claiming business asset disposal relief.

chapter reference 12B2D

Question 20

Hannah is employed as a director of the family firm. What is her National Insurance contribution liability if she earns £11,000 as a salary and draws £35,000 as dividends in 2021/22?

Select one:

a. £571.20.
b. £1,140.
c. £1,320.
d. £171.84.

Answer 20

d. £171.84.

chapter reference 12A5B

Question 21

Bernard, who is self-employed, has profits of £62,500 for 2021/22. Assuming a 52 week tax year, what is Bernard’s total National Insurance contribution liability for 2021/22?

Select one:

a. £5,625.
b. £4,066.38.
c. £4,922.48.
d. £3,907.78.

Answer 21

b. £4,066.38.

chapter reference 12A5B

Question 22

An investor wishes to defer a capital gains tax liability and would also like to obtain income tax relief on the investment. This could be achieved by reinvesting a gain of up to:

Select one:

a. £200,000 into a venture capital trust and this investment will be eligible for tax relief of up to 30%.
b. £200,000 into a venture capital trust and this investment will be eligible for tax relief of up to 20%.
c. £1m into an enterprise investment scheme and this investment will be eligible for tax relief of up to 30%.
d. £1m into an enterprise investment scheme and this investment will be eligible for tax relief of up to 20%.

Answer 22

c. £1m into an enterprise investment scheme and this investment will be eligible for tax relief of up to 30%.

chapter reference 12B4A

Question 23

Horace, who is self-employed, wishes to encash a number of unit trusts and OEICs but faces a considerable capital gains tax liability if he does so. He can defer this liability if he invests the proceeds into:

Select one:

a. an enterprise investment scheme.
b. National Savings and Investments certificates.
c. investment trusts.
d. government issued bonds.

Answer 23

a. an enterprise investment scheme.

chapter reference 12B4

Question 24

Haris is 45 and has a salary of £52,000. He has a company car giving him a taxable benefit of £5,000. He pays interest of £1,500 on a loan to pay inheritance tax and £4,000 into a retirement annuity plan that doesn’t operate tax relief at source. What is his income tax liability for 2021/22?

Select one:

a. £8,032.
b. £10,300.
c. £13,060.
d. £8,832.

Answer 24

a. £8,032.

chapter reference 12A5A

Question 25

Sarah died in December 2021 with an estate worth £875,000 which she left equally to her four grandchildren. Her late husband had fully utilised his nil rate band on his death, Sarah had made no previous lifetime transfers, and neither estate contained any residential property. How much will each grandchild receive after inheritance tax has been taken into consideration?

Select one:

a. £163,750.
b. £164,350.
c. £164,050.
d. £218,750.

Answer 25

a. £163,750.

chapter reference 12A5D

Question 26

Doug disposes of some shares in May 2021, incurring a capital gains tax liability. He could defer some or all of this tax liability by investing the gains in an enterprise investment scheme, provided he does so between:

Select one:

a. May 2020 and May 2023.
b. May 2020 and May 2024.
c. May 2021 and May 2024.
d. May 2021 and May 2023.

Answer 26

b. May 2020 and May 2024.

chapter reference 12B4A

Question 27

Jo, who has taxable income after deduction of the personal allowance of £34,200 for 2021/22, purchased a diamond ring for £6,500 in 2005. She sold the ring for £28,000 in August 2021, with no other gains or losses in 2021/22. Jo’s capital gains tax liability will be:

Select one:

a. £920.
b. £1,490.
c. £1,900.
d. £1,550.

Answer 27

b. £1,490.

chapter reference 12A5C

Question 28

George, aged 50 and self-employed, has profits of £75,000 for 2021/22. What is George’s total National Insurance contribution liability for 2021/22?

Select one:

a. £4,157.78.
b. £5,888.88.
c. £3,821.78
d. £4,316.38.

Answer 28

d. £4,316.38.

chapter reference 12A5B

Question 29

Just over three years ago, Florence, a higher-rate taxpayer, invested £40,000 in a non-qualifying UK life assurance bond. The bond is now worth £38,000. What maximum withdrawal, if any, could she make without incurring any tax charge in the current tax year?

Select one:

a. £4,000.
b. Nil.
c. £8,000.
d. £2,000.

Answer 29

c. £8,000.

chapter reference 12B5C

Question 30

Jake, 22, invested £4,000 into a flexible cash ISA in May 2021. He withdrew £2,000 in July 2021. What is the maximum amount that he can invest into the account in the remainder of the 2021/22 tax year?

Select one:

a. £16,000.
b. £17,000.
c. £14,000.
d. £18,000.

Answer 30

d. £18,000.

chapter reference 12B3B

Question 31

In order to avoid paying any personal tax on encashment of a qualifying policy with a premium paying term of 12 years, for what minimum period of years must the policy be held?

Select one:

a. 9.
b. 10.
c. 12.
d. 7.5.

Answer 31

a. 9.

chapter reference 12B5D

Question 32

In May 2021 Kenny makes a chargeable gain of £15,000 and in July 2021 he makes a second chargeable gain of £16,000. Neither gain was related to residential property. In 2021/22 he has a taxable income after deducting reliefs and allowances of £35,200 and makes a net payment to his personal pension of £4,000. If he has no other chargeable gains or losses, what will his capital gains tax liability be for 2021/22?

Select one:

a. £3,490.
b. £3,740.
c. £3,050.
d. £2,990.

Answer 32

d. £2,990.

chapter reference 12A5C

Question 33

David, an additional-rate taxpayer, has recently sold some shares and as a result has incurred a capital gains tax [CGT] liability of £60,000. He has used the proceeds of the sale to make further investments including £20,000 into an enterprise investment scheme and £40,000 into a venture capital trust. As a result he can defer:

Select one:

a. £20,000 CGT liability and claim income tax relief of £18,000.
b. £20,000 CGT liability and claim income tax relief of £16,000.
c. £40,000 CGT liability and claim income tax relief of £18,000.
d. £40,000 CGT liability and claim income tax relief of £16,000.

Answer 33

a. £20,000 CGT liability and claim income tax relief of £18,000.

chapter reference 12B4

Question 34

If a cash ISA provides a fixed rate of 1.8% per annum, what gross rate would an additional-rate taxpayer need to receive from a taxable investment to earn an equivalent amount each year?

Select one:

a. 3.27%.
b. 2.79%.
c. 3%.
d. 2.25%.

Answer 34

a. 3.27%.

chapter reference 12B3A

Question 35

Erica is emigrating to New Zealand permanently. It is wise to postpone the disposal of shares that are likely to produce gains until, at the earliest, the tax year:

Select one:

a. in which the departure takes place.
b. five years on from the one in which departure takes place.
c. before the one in which departure takes place.
d. after the date of departure.

Answer 35

d. after the date of departure.

chapter reference 12B6A

Question 36

Ria has trading profits of £165,000 and also receives £6,000 salary as a non-executive director of a separate company. She pays £8,500 net into her personal pension. What is Ria’s income tax liability for 2021/22, rounded to the nearest pound?

Select one:

a. £61,910.
b. £59,785.
c. £58,735.
d. £59,254.

Answer 36

d. £59,254.

chapter reference 12A1

Question 37

Sarah is 73 and a widow. In 2021/22 she has pension income of £18,000 and receives interest of £2,000 from her bank account. How much tax, if any, will she be liable for on the interest payment?

Select one:

a. £300.
b. £400.
c. None.
d. £200.

Answer 37

d. £200.

chapter reference 12A5A

Question 38

Sully is an employee who is paid £3,000 gross a month. For the year of 2021/22, he will have paid total employee class 1 National Insurance contributions, rounded up to the nearest pound, of:

Select one:

a. £3,240.
b. £4,320.
c. £3,648.
d. £3,172.

Answer 38

d. £3,172.

chapter reference 12A5B

Question 39

Deb, age 57, has a gross income of £130,000 and she has made a net personal pension contribution of £10,000. What will her personal allowance be in 2021/22?

Select one:

a. £8,750.
b. £3,820.
c. £2,500.
d. £12,570.

Answer 39

b. £3,820.

chapter reference 12A5A

Question 40

Susan, aged 79, has pension income of £16,420 and bank interest of £4,160. Her income tax liability for 2021/22 will be:

Select one:

a. £1,172.
b. £1,602.
c. £1,402.
d. £1,432.

Answer 40

a. £1,172.

chapter reference 12A5A

Question 41

Maud is an 80 year-old widow. In 2021/22 she has pension income of £12,720, receives interest of £3,000 from her bank account and dividends of £1,500 from shares in the company she used to work for. What is her income tax liability for 2021/22?

Select one:

a. £630.
b. £30.
c. £160.
d. £930.

Answer 41

b. £30.

chapter reference 12A5A

Question 42

Klaus is non-UK domiciled but has been a UK resident for tax purposes for 13 out of the past 14 years. He currently receives significant income in Germany on an unremitted basis but he is reconsidering this. If he changed to a remittance basis, he would:

Select one:

a. receive it free of charge and could keep his personal allowance.
b. receive it free of charge but would lose his personal allowance.
c. have to pay £60,000 each tax year he wishes to use it and would lose his personal allowance for that year.
d. have to pay £30,000 each tax year he wishes to use it but would keep his personal allowance.

Answer 42

c. have to pay £60,000 each tax year he wishes to use it and would lose his personal allowance for that year.

chapter reference 12B6B

Question 43

Mr Humphries is 47 and has a salary of £33,520. He has a company car giving him a benefit of £3,000. He pays interest of £1,500 on loan to pay inheritance tax and £2,500 into a retirement annuity plan that doesn’t operate tax relief at source. What is his income tax liability for 2021/22?

Select one:

a. £3,990.
b. £3,390.
c. £4,490.
d. £4,290.

Answer 43

b. £3,390.

chapter reference 12A5A

Question 44

Karen, 16, has two sisters: Joanne, 18, and Lisa, 21. They should be aware that:

Select one:

a. Karen can invest more into ISAs this tax year than her sisters.
b. Joanne can invest more into ISAs this tax year than her sisters.
c. Karen and Joanne can invest more into ISAs this tax year than Lisa.
d. they can all invest the same maximum amount into ISAs this tax year.

Answer 44

a. Karen can invest more into ISAs this tax year than her sisters.

chapter reference 12B3B

Question 45

Harriet bought a vase in 1997 for £300. In 2020 she discovers it is actually worth a great deal more and sells it via an auction on 20 July 2021 for £32,500 incurring costs of £1,000. What is Harriet’s capital gains tax liability for 2021/22 assuming she has no other capital disposals and has a taxable income after deducting the personal allowance of £25,200?

Select one:

a. £2,020.
b. £2,590.
c. £2,530.
d. £2,350.

Answer 45

c. £2,530.

chapter reference 12A5C

Question 46

An investor, who is currently UK resident, has held a non-UK life assurance bond for eight years and was non-resident for six of those years. What proportion of any gain, if any, would be free of UK income tax?

Select one:

a. None.
b. 25%.
c. 75%.
d. 50%.

Answer 46

c. 75%.

chapter reference 12B6A

Question 47

Jim, a bachelor who has never owned his own house, gifted £500,000 to his brother in February 2016. Assuming that this is the only gift he had made and that he had never used any annual exemptions, what would be the inheritance tax liability on this gift if Jim died in November 2021?

Select one:

a. £27,040.
b. £28,000.
c. £40,560.
d. £67,600.

Answer 47

a. £27,040.

chapter reference 12A5D

Question 48

Gregory, a higher-rate taxpayer, is contemplating a £40,000 investment into a venture capital trust [VCT]. If he did so:

Select one:

a. he will receive 20% tax relief on his investment and can ‘defer’ gains from another investment into the VCT.
b. his investment will be very liquid and he will be taxed at 32.5% on any dividends he receives.
c. his dividends will not be liable to any tax and any gains on his investment would be exempt from capital gains tax.
d. he will receive 30% tax relief on his investment and can ‘defer’ gains from another investment into the VCT.

Answer 48

c. his dividends will not be liable to any tax and any gains on his investment would be exempt from capital gains tax.

chapter reference 12B4C

Question 49

Dave is a widower who has made no lifetime transfers. He died in 2021/22 with an estate of £800,000. He left £50,000 to charity and split the rest of his estate amongst his two sons. This included a residential property owned by Dave and his deceased wife, valued at £250,000. Dave’s deceased wife’s inheritance tax [IHT] nil rate band was fully used at the time of her death in 2015. What is the IHT due on Dave’s estate?

Select one:

a. £63,000.
b. £70,000.
c. £153,000.
d. £170,000.

Answer 49

a. £63,000.

chapter reference 12A5D

Question 50

Imran sold two share holdings in the current tax year. The first realised £100,000 having been purchased for £35,000. The second realised £40,000 having been inherited at a value of £60,000. The disposal costs for each were £500. Assuming he had no further losses and made no other capital gains during the tax year, what would be his taxable gain?

Select one:

a. £33,000.
b. £31,700.
c. £31,200.
d. £32,700.

Answer 50

b. £31,700.

chapter reference 12A5C

Question 51

Jane, aged 45, earns £59,920 from her employment and makes a personal pension contribution of £4,000 net per annum. How much is her tax liability in 2021/22?

Select one:

a. £10,400.
b. £11,400.
c. £9,470.
d. £13,828.

Answer 51

a. £10,400.

chapter reference 12A5A

Question 52

Edward bought shares in XYZ plc in 2000 for £12,000 and sold them in May 2021 for £60,000. He also bought shares in OPQ plc for £15,000 in 2002 and sold them on 1 June 2021 for £14,000. His stockbroker’s fees for selling the shares were £900 and £210 respectively. He has made no other gains or losses. What is the taxable gain for capital gains tax purposes?

Select one:

a. £33,590.
b. £33,890.
c. £34,190.
d. £34,590.

Answer 52

a. £33,590.

chapter reference 12A5C

Question 53

Mohammed, who is 45, earns a salary of £37,420 and has a company car with a taxable benefit of £2,800. He also receives interest of £1,000 from his building society. He has no other income. What is his income tax liability for 2021/22?

Select one:

a. £5,670.
b. £5,530.
c. £4,970.
d. £5,730.

Answer 53

b. £5,530.

chapter reference 12A5A

Question 54

Sandra, who is 85 and married, receives a pension from her scheme of £22,080 per annum plus a State pension of £120 per week. How much personal allowance will she be entitled to in 2021/22?

Select one:

a. £21,695.
b. £13,830.
c. £12,570.
d. £12,500.

Answer 54

c. £12,570.

chapter reference 12A5A

Question 55

Steve, 44 and a monthly paid employee, earned £5,000 during August 2021. His employee’s class 1 National Insurance contributions for the month of August 2021 are:

Select one:

a. £600.
b. £423.26.
c. £504.36.
d. £456.48.

Answer 55

b. £423.26.

chapter reference 12A5B

Question 56

On the encashment of a life assurance policy, what factor will have NO impact on whether tax is payable or, if it is, by what amount?

Select one:

a. The taxation regime of the underlying assets held within the life funds.
b. How much capital gains tax annual exempt amount is available in the year of encashment.
c. How much top slicing relief is available.
d. The tax position of the investor at the time they encash the policy.

Answer 56

b. How much capital gains tax annual exempt amount is available in the year of encashment.

chapter reference 12B5

Question 57

Yvonne is aged 33 and will invest £3,000 into a Lifetime ISA in the 2021/22 tax year. What Government bonus will Yvonne receive this year and until what age will she be eligible for the bonus on future contributions?

Select one:

a. £600 and Yvonne will be eligible for the bonus until age 55.
b. £750 and Yvonne will be eligible for the bonus until age 50.
c. £750 and Yvonne will be eligible for the bonus until age 40.
d. £1,000 and Yvonne will be eligible for the bonus until age 45.

Answer 57

b. £750 and Yvonne will be eligible for the bonus until age 50.

chapter reference 12B3B

Question 58

Roger, a higher-rate taxpayer, has £15,000 to invest for the medium term. His most tax efficient option would be to invest the money in a[n]:

Select one:

a. ISA.
b. current account with his bank, which pays 1.5% on credit balances.
c. unit trust held jointly with his non-taxpayer wife.
d. NS&I Investment account.

Answer 58

a. ISA.

chapter reference 12B1B

Question 59

Mr Edwards is a pensioner who receives a pension income of £30,000 gross and £4,000 of gross savings income. Mr Edwards would:

Select one:

a. qualify for the full personal savings allowance.
b. be able to claim the starting rate of 0% on savings.
c. qualify for the dividend allowance.
d. be a higher-rate taxpayer.

Answer 59

a. qualify for the full personal savings allowance.

chapter reference 12A5A

Question 60

On Luke’s death in May 2021 he was divorced and his estate was valued at £975,000 including a residential property valued at £380,000. He left £150,000 to charity and split the remainder of his estate equally between his two children. Assuming he has made no lifetime transfers, what amount of IHT is payable?

Select one:

a. £190,000.
b. £126,000.
c. £117,000.
d. £200,000.

Answer 60

c. £117,000.

chapter reference 12A5D

Question 61

Lee Thomas is 76 and a widower. In 2021/22 he receives a company pension of £15,000 per annum, the Basic State pension of £135.60 per week and bank interest of £2,500 per annum from his bank account. Based on a 52 week year, what is his income tax liability for 2021/22, rounding to the nearest pound?

Select one:

a. £2,396.
b. £4,896.
c. £2,196.
d. £1,896.

Answer 61

c. £2,196.

chapter reference 12A5A

Question 62

John is a 30 year old employee who is paid £1,495 per week. What is his employer’s National Insurance contribution liability?

Select one:

a. £206.31 per week.
b. £182.85 per week.
c. £104.60 per week.
d. £159 per week.

Answer 62

b. £182.85 per week.

chapter reference 12A5B

Question 63

A small family run limited company has just two director employees, who both take salaries of £8,000 a year and £20,000 each in dividends. What is the total National Insurance bill for the company in 2021/22?

Select one:

a. £1,920.
b. £2,208.
c. £1,311.

chapter reference 12A5B

d. £0.

Answer 63

d. £0.

chapter reference 12A5B

Question 64

Peter, a bachelor, gifted a lump sum of £1,000,000 to his son Adam in February 2017. What would be the inheritance tax liability on this gift if Peter died in August 2021 leaving no residential property, assuming this was the only gift Peter had ever made?

Select one:

a. £160,560.
b. £270,000.
c. £267,600.
d. £162,000.

Answer 64

a. £160,560.

chapter reference 12A5D

Question 65

Adam, who is 18 and Lee, who is 17 would both like to invest in a cash ISA. How much more than Lee, if anything, can Adam invest in 2021/22?

Select one:

a. Nil.
b. £20,000.
c. £29,000.
d. £9,000.

Answer 65

a. Nil.

chapter reference 12B3B

Question 66

Emily is 35 and single. She has a salary of £37,570 and a company car, the value of which for tax purposes is £3,500 in 2021/22. How much of her income will be taxed at the basic rate?

Select one:

a. £34,500.
b. £28,500.
c. £25,000.
d. £29,150.

Answer 66

b. £28,500.

chapter reference 12A5A

Question 67

On encashment of a non-qualifying UK life assurance policy, an additional-rate taxpayer will be subject to a further income tax charge of:

Select one:

a. 50%.
b. 25%.
c. 20%.
d. 40%.

Answer 67

b. 25%.

chapter reference 12B5B

Question 68

Saskia is self-employed. In the tax year 2019/20 she made a £2,000 profit; in the tax year 2020/21 she made a £5,000 loss; in the tax year 2021/22 she makes a £19,000 profit. What level of class 4 National Insurance contributions will she pay in 2021/22?

Select one:

a. £483.12.
b. £398.88.
c. £848.88.
d. £578.88.

Answer 68

b. £398.88.

chapter reference 12A5B

Question 69

If a tax free investment provided a fixed rate at 3.2% per annum, what gross rate would a higher-rate taxpayer need to receive from a taxable investment to earn an equivalent amount each year?

Select one:

a. 4.26%.
b. 6.4%.
c. 5.33%.
d. 4%.

Answer 69

c. 5.33%.

chapter reference 12B3A

Question 70

Daisy has a total income of £17,570 from her drawdown pension fund and also receives savings income of £2,000. If she reduces her drawdown income by £1,000 in 2021/22, her net income will reduce by:

Select one:

a. £600.
b. £800.
c. £400.
d. £200.

Answer 70

a. £600.

chapter reference 12A5A