Chapter 3

Question 1

Exempt:

Answer 1

Interest on National Savings Certificates
Income from ISAs
Betting, competition, lottery + prem bond winnings
Housing benefit, child benefit
Stat red pay
Scholarships
Income tax repayment interest
Apprenticeship bursaries for children leaving local authority care
Compensation payments made under ‘qualifying payment schemes’ such as the Windrush Compensation Scheme

Question 2

Personal allowance

Answer 2

12570

Over 100,000: surplus divided by 2 and deducted from PA = reduced PA

Over 100,000 + 2 (12570) = 125140 - no PA

Question 3

Taxable income

Answer 3

Net income - PA = taxable income

Taxable income - tax reductions (marriage allowance) + child benefit tax charge = income tax liability

Income tax liability - tax deducted at source (PAYE) = Income tax payable/repayable

Question 4

NSI

Answer 4

Basic < 37,700 : 20%
Higher rate < 150,000 : 40%
Additional > 150,000 : 45%

Question 5

SI

Answer 5

Starting rate for savings: first 5000 of ALL INCOME = tax-free 0% (SOME)

Savings income nil rate (basic / higher) = first 1000 / 500 tax-free 0% (ALL B/H)

Both count towards the basic rate band!!!

BR: 20%
HR: 40%
AR: 45%

Question 6

DI

Answer 6

DI-nil rate: first 2000 TO ALL

See tax tables: different rates and names!!!!

Question 7

Gift aid

Answer 7

BR-TP = at source
ie. Wants to donate £100:
Donate: 80
Gov pays: 20

HR-TP and AR-TP = increase BR and HR band by GROSS donation amount
ie. Has donated 1600
Gross = 2000
Increase BR threshold to 37700 + 2000 = 39700
Increase HR threshold to 150000 + 2000 = 152000

Question 8

Marriage allowance

Answer 8

Conditions:

• Partner is a BR-TP
• Donor is either a BR-TP (after the PA reduction) OR have no tax liability
• Cannot be added onto partner’s PA = it is taxed and deducted from their tax (ie 1000 @ 20% = 200 deducted from partner’s tax liability)

MAXIMUM = 1260 tf 20% = 252 which can be deducted from tax liability!!!