chapter 2 income tax Flashcards
who is a tax chargeable person for resident and non-resident
Any individual who is resident in the UK is liable to UK income tax on his on his income arising throughout the world.
A person who is not resident in the UK is only liable to UK tax on income
arising in the UK
what following people are not treated as a uk resident
- A person who is in the UK for less than 16 days during a tax year
A person who is in the UK for less than 46 days during a tax year, and who has not been
resident during the previous three tax years.
- A person who works full-time overseas, subject to them not being in the UK for more than 90
days during a tax year.
what following people are treated as automatic resident in the uk
A person who is in the UK for 183 days or more during a tax year
- A person whose only home is in the UK
- A person who carries out full-time work in the UK and more than 75% of his working days are in the UK
what test should you use if the person does not meet any categories of the first 2 tests
the sufficient ties test
what is the sufficient ties test
if an individual’s residence cannot be determined by either of the automatic tests, then their status is found by:
- Number of ties they have in the UK and
- Number of days they are present in the UK in a tax year
what are the 5 ties
- Having close family (spouse/civil partner or minor child) in the UK or
- Having a house in the UK which is used at least for one night in the tax year or
- Doing substantive work in the UK or ( 3 hrs or more for 40 or more days)
- Being present in the UK for more than 90 days during either of the two previous tax years or
- Spending more time in the UK than any other country in the tax year
how to know how many ties are needed?
look at the table that is provided to indicate how many ties are needed based on days spent in the uk
how long is the tax year
from 6 April 2023 to 5 April 2024
what types of income is exempt from income tax
- Interest on National Savings and Investments (NS & I) Certificates
- Lottery, betting and gaming winnings
- Interest on repayments of overpaid income tax or capital gain tax
- Redundancy payments
- Scholarship income
- Insurance benefits paid in the event of accident, sickness, disability, infirmity or
unemployment - Child benefit
- Incomes from Individual Savings Accounts (ISAs)
o Maximum Limit: £20,000\
o Can invest either in cash (16 years age or above) or in shares (18 years age or
above)
what counts as qualifying interest payments
QUALIFYING PURPOSes:
o Loan to buy plant or machinery for partnership use
o Loan to buy plant or machinery for employment use
o Loan to buy interest in employee – controlled company (co-operative)
o Loan to invest in partnership
how much is personal allowance
12,570
what is the NSI, SI, DIVIDEND INCOME TAX RATE FOR 0-37,700
20%, 20%, 8.75%
what is the NSI, SI, DIVIDEND INCOME TAX RATE FOR 37,700-125,140
40%,40%, 33.75%
what is the NSI, SI, DIVIDEND INCOME TAX RATE FOR 125,141 AND ABOVE
45%,45%,39.35%
how to apply the tax calculation
from left to right you look at the total income and select the appropriate rate band. you then tax NSI, SI, and dividend income by the appropriate rate separately then add to get the tax liability
