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Platforms, Wealth Management and Service Providers > Chapter 7: Taxation > Flashcards

Chapter 7: Taxation Flashcards

1
Q

UK financial years runs from

A

6th April until 5th April the following year

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2
Q

Income tax may arise on the following types of income:

A

• earnings from employment, including the value of any ‘perks’ such as company cars
• earnings from self-employment also including ‘perks’
• most pension income
• interest on most savings
• dividend income from shares and CIS
• rental income
• income paid by trust

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3
Q

What incomes are not taxable?

A

• certain kinds of state benefits, such as disability benefits, housing benefit, maternity allowance and tax credits
• interest on National Savings Certificate
• premium bond winnings

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4
Q

The tax rates and reliefs for the following tax year are decided by?

A

Parliament in the annual Finance Act, which follows the presentation of the budget to parliament each year.

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5
Q

Basic rate taxable income 20% is applicable for first?

A

£37,700

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6
Q

Higher rate taxable income 40% is applicable for next?

A

£87,440

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7
Q

Additional rate for taxable income is what percentage?

A

45%

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8
Q

Additional rate for taxable income of 45% is for over?

A

£125,140

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9
Q

Income tax on employment income is normally deducted at source by the taxpayers employer under what scheme and paid to who?

A

Pay as you earn (PAYE) scheme and paid to HMRC

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10
Q

What date do other forms of income need to be declared on the annual tax return?

A

Paid no later then 31st January

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11
Q

Savings income allowance of first .. tax free for basic, higher and additional

A

Basic: £1,000
Higher: £500
Additional: no tax free allowance

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12
Q

For dividend income before tax is applicable, what is this number?

A

£1,000

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13
Q

Tax bands for dividend income: basic, higher, additional.

A

Basic rate: 8.75%
Higher rate: 33.75%
Additional rate: 39.35%

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14
Q

Can capital losses be used to reduce liability to CGT?

A

Yes

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15
Q

What gains does CGT not apply to?

A

Those made in an ISA or Pension Wrapper

Additionally, private UK investors are exempt if profits are generated from the sale of gilts & qualifying corporate bonds.

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16
Q

How is the capital gains on a equities transaction calculated?

A

The difference between the sale price and purchase price of the quantity of shares concerned.

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17
Q

Maximum amount into pension per annum

A

£60,000

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18
Q

What else qualifies as tax free gains for CGT?

A

• primary home
• Gilts
• cars
• Corporate bonds

19
Q

In the event of a net loss in a fiscal year, can individuals carry this over and is there a limit?

A

Yes and the loss can be claimed up to 4 years from the loss occurring

20
Q

What are the three HMRC matching rules to be followed to identify which acquisitions should be allocated to a sale?

A
  1. Acquisitions the same day as the sale
  2. Acquisitions during the 30 days following the sale first in, first out basis
  3. Shares bought at any other time.
21
Q

What is Section 104 holding?

A

All shares acquired prior to the day of a sale, of the same share class in the same company are pooled together.

22
Q

How is Section 104 calculated?

A

Dividing the total amount paid for the shares in Section 104 holding by the number of shares.

23
Q

Investment gains for CGT are taxed above what amount for residential property? basic, higher, additional

A

• 10% for basic rate tax payers and 18% on residential property

• 24% for higher and additional tax rate payers on residential gains

• 24% for trustees and the personal representative of deceased on residential property

24
Q

Who pays the income tax within the wrapper for insurance bonds and to whom is it paid?

A

Paid by the insurer to their tax authority in the country of domicile.

25
Q

For offshore bonds, does income tax within the wrapper apply?

A

Sometimes, however the amount payable will be minimal or even 0.

26
Q

Do insurance bonds pay CGT within the wrapper?

A

Yes, paid by the insurer to their tax authority in the country of domicile.

27
Q

How much of the SIPP fund value can be withdrawn as tax-free cash?

A

Up to 25%

28
Q

What is ‘top slicing relief’?

A

Higher rate tax payers for insurance bonds are effectively sharing the gain over a number of years.

29
Q

For investment bonds, how much can be withdrawn each year as income without the amount being subject to UK income tax?

A

5%

30
Q

If the allowed 5% of income has not been used for the investment bond, what can occur?

A

The remainder is carried on the following year e.g. 10% next year

31
Q

For an investment bond what is the taxable gain at full surrender calculated as?

A

Current value + previous withdrawals - initial investment - previous excesses

32
Q

What is BADR business asset disposal relief?

A

This allows individuals and some trustees to claim relief on qualifying gains made on the disposal of all or part of their business. Resulting rate is 10%

33
Q

Inheritance tax is usually paid out on an estate?

A

When someone dies or can be payable on trusts or gifts made during someone’s lifetime.

34
Q

What is the minimum threshold for inheritance tax?

A

£325,000 with the threshold increasing to £500,000 if a family home is being passed down to children/grandchildren.

35
Q

What percentage of tax is payable where the value of the estate exceeds the threshold?

A

40% on the excess.

36
Q

Common exceptions from IHT:

A

• threshold £325,000
• spouse
• charities
• gifts of £3,000 per annum
• small gift of £250 per person
• wedding gifts
• potentially exempt - survives for 7 years after making a gift for someone

37
Q

What tax is applied in the UK for trading in securities?

A

Stamp duty reserve tax (SDRT)

38
Q

What is the current SDRT rate? Updated

A

0.5% for purchases costing £1000 or more.

39
Q

SDRT is payable on ?

A

• shares in UK company’s not CIS/units bought from fund manager
• shares in FX
• Option to buy shares
• rights arising from shares already owned
• interest in money made selling shares

40
Q

Most trades in UK listed securities are settled by?

A

CREST, which automatically deducts SDRT

41
Q

Three types of land transaction tax’s that now apply in UK?

A

• England/Northern Ireland - SDLT
• Scotland - Land & Buildings Transaction tax
• Wales - Land transaction tax

42
Q

What is a probate valuation?

A

A valuation for inheritance tax purposes at the date of death.

43
Q

What is the most popular form of a trust?

A

One whereby grandparents put some of their assets in a trust for grandchildren as it will not be applicable to inheritance tax upon their death.

44
Q

Does SDRT collect on the purchase or sale of securities?

A

Purchase

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