Chapter 3 Definitions Flashcards
Income tax
Paid by individuals (employees, investors, partners and self-employed) on their taxable income
Taxation at source
Some income is received by the taxpayer net of tax, which means that tax is already deducted at the source of the income
Gross income
Income before any form of deduction has been made
Non-savings income
Income that is not categorised as from a specific source is taxed as a miscellaneous income e.g Employment income, Trading profits, Property income, Miscellaneous income.
Savings income
Interest from investments
Dividend income
Dividends from UK and overseas companies
Net income
The total chargeable income before deducting the personal allowance
Taxable income
Net income after deduction of the personal allowance
Personal allowance
The amount of income on which no income tax is charged
Tax liability
The total amount of income tax due from a taxpayer
Savings income nil rate band
The first £1000 (basic rate taxpayer) or £5000 (higher rate taxpayer) of savings income, above the starting rate band, on which income tax is charged at the savings nil rate (0%)
Dividend nil rate band
The first £1000 of taxable dividend income on which income tax is charged at the dividend nil rate (0%)
Tax payable or repayable
The amount of income tax payable by a taxpayer (or repayable by HMRC) under self-assessment after taking into account tax deducted at source
Gift Aid
The Gift Aid Scheme gives tax relief for cash donations made by individuals to charities
Marriage allowance
In 2023/2024, in limited cases a spouse or civil partner may elect to transfer £1,260 of their personal allowance to their partner. The transferor spouse must either have no tax liability or be only a basic rate taxpayer after such a deduction in their personal allowance. The recipient must also be a basic rate taxpayer
