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Investment Environment > Chapter 6 - Taxation in the UK > Flashcards

Chapter 6 - Taxation in the UK Flashcards

1
Q

What is the current Personal Tax Allowance for income tax purposes?

A

£12,500

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2
Q

What are the current Income Tax Rates?

A 
Starting rate for savers: £5,000 (for those earning less than £17,500 pa.)
Basic rate (20%): £0-£37,500
Higher rate (40%): £37,501-£150,000
Additional rate (45%): £150,001 and above
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3
Q

What are the current Dividend Tax Rates?

A

Dividend Allowance: £2,000
Basic rate: 7.5%
Higher rate: 32.5%
Additional rate: 38.1%

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4
Q

What are the current rates on Capital Gains Tax?

A

Capital gains tax exempt amount: £12,000

Basic rate: 10%
Higher rate: 20%

Basic rate on residential property: 18%
Higher rate on residential property: 28%

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5
Q

What is the IHT threshold (NRB) and rate?

A 
IHT threshold (NRB): £325,000
IHT rate: 40%
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6
Q

What is the current Corporation tax rate?

A

19%

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7
Q

What is the annual tax-free Pensions allowance (the amount you can put into a pension in a year tax-free)?

A

£40,000

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8
Q

What is the annual ISA limit?

A

£20,000

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9
Q

What is the tax-relief rate for Enterprise Investment Schemes (EIS)

A

30% up to £1m.

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10
Q

What is the tax-relief limit for Seed EISs?

A

50% up to £100,000

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11
Q

What is the tax-relief limit for Venture-Capital Trusts (VCTs)?

A

30% up to £200,000

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12
Q

Who is income tax payable by?

A

All UK residents on their worldwide income and all non-residents with a UK source of income.

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13
Q

What is a Potentially Exempt Transfer (PET)?

A

A lifetime gift that is free of IHT, as long as the gift is given 7 years before the donor’s death.

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14
Q

How much is the tax-free commencement lump sum (PCLS) that can be taken out of a pension fund upon retirement?

A

25%

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15
Q

How are the rental income/chargeable gains of Real Estate Investment Trusts (REITs) taxed?

A

They are tax-free up until the REIT level. Then are taxed at the investor’s marginal rate when they are paid as dividends.

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16
Q

What is the remittance basis tax rates?

A

If they have been a UK resident for 7/9 previous tax years, they must pay an annual fee of £30,000.
If they have been a UK resident for 12/14 previous tax years, they must pay an annual fee of £60,000.
As well as paying tax on UK income.
A person who has been a UK-resident for more than 15 years, becomes domiciled.

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17
Q

What is a Chargeable Lifetime Transfer (CLT)?

A

A lifetime transfer to a party other than an individual (typically a trust) that is not covered by a tax exemption. A CLT above the NRB incurs a tax of 20%.

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18
Q

What is the 7 year Taper Relief Rule?

A

To stop people from avoiding IHT, by giving away numerous CLTs of £325,000 each. So, every time a transfer is made the IHT rules look back over a seven year period and then adjust the NRB where appropriate.

19
Q

How can CGT paid be reduced?

A

Managing the timing of disposals to make the most of the annual exempt amounts and capital losses.

20
Q

Difference between tax avoidance and tax evasion?

A

Tax avoidance is legally reducing tax paid. Tax evasion is illegal.

21
Q

What are the tax rates of Stamp Duty Land Taxes (SDLTs)?

A 
£0-£125,000: 0%
£125,001-£250,000: 2%
£250,001-£925,000: 5%
£925,001-£1,500,000: 10%
Over £1,500,000: 12%

Additional 3% for second homes (e.g. buy-to-let properties. N.B. the additional 3% is not applicable for residential properties below £40,000).

22
Q

What is the Stamp Duty Reserve Tax (SDRT)?

A

Tax on electronic transactions involving shares. Paid at a flat rate of 0.5%.

23
Q

What are the Taper Relief Tax rates for a gift that was given within 7 years of the donor’s death?

A 
0-3 years: 40%
3-4 years: 32%
4-5 years: 24%
5-6 years: 16%
6-7 years: 8%
24
Q

At what income would a person no longer be entitled to a personal allowance?

A

£125,000.
This is because once someone’s income exceeds £100,000, their personal allowance is withdrawn at a rate of £1 for every £2 earned.
Nom-Doms are also not at all entitled to the PA.

25
Q

What are the different tax-free personal saving allowances on savings income?

A

£5,000 (if a person’s income is less than £17,500)
Basic: £1,000
Higher: £500
Additional: None

26
Q

How much can given as a gift tax-free per year? What is the tax thereafter?

A

£3,000. 20% (gifts)

27
Q

What is the standard rate of VAT?

A

20%. The reduced rate (e.g. for domestic fuel is 5%)

28
Q

On which dates are the first and second self-assessment payments on account for 2019/20 due?

A

The payments are due on 31 January in the tax year, and on 31 July after the tax year ends.

29
Q

How much of an investment into a Junior ISA is tax-free?

A

£4,368

30
Q

What is important to remember about Nil Rate Bands?

A

They are only applicable to transfers that are NOT between spouses - as long as both were UK-domiciled.

31
Q

What are the requirements to qualify for entrepreneur’s relief?

A

You must be a sole trader/business partner and have owned the business for at least two years.

32
Q

What is entrepreneur’s relief?

A

You only pay a 10% tax on all qualifying capital gains.

33
Q

How is income from investments within a pension plan taxed?

A

It is tax-free. A pension arrangement acts as a tax-free wrapper.

34
Q

Who is not subject to IHT?

A

Non-domiciled UK residents (N.B. they are subject to IHT with the transfer of UK assets).

35
Q

What is the RNRB and what are its different values for the years 18/19, 19/20 and 20/21?

A

The RNRB is an additional value to be added to the NRB on a main residence when passing to children/grand-children. It is added to the NRB amount (£325,000).
18/19: £125,000
19/20: £150,000
20/21: £175,000

36
Q

What is the tax-relief for pension contributions?

A

At the taxpayer’s marginal rate (20%/40%/45%), and capped at £40,000. An individual with income above £150,000 will have a tapered allowance.

37
Q

What is flexi-access drawdown?

A

A pension product that lets you access your pension savings whenever you need to.

38
Q

What is the pension contribution allowance with a flexi-access drawdown pension scheme?

A

£4,000

39
Q

On which purchases is SDRT not paid?

A

Bonds, AIM, ISDX growth, ETF and derivative purchases.

40
Q

How often are large companies required to pay corporation tax?

A

Every quarter.

41
Q

What percentage of the initial investment of a life assurance bond can be withdrawn in a tax year without an immediate income tax liability?

A

5%

42
Q

An investment in a VCT will qualify for a tax reduction of what percentage of the amount invested?

A

30% - the tax relief will be lost if investments are not held for 5 years

43
Q

When should companies pay corporation tax?

A

Nine months and one day after the end of their accounting period. Companies with annual profits of over £1.5m are required to pay each quarter.

Investment Environment (7 decks)

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