Chapter 7: Taxation Flashcards
UK financial years runs from
6th April until 5th April the following year
Income tax may arise on the following types of income:
• 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
What incomes are not taxable?
• certain kinds of state benefits, such as disability benefits, housing benefit, maternity allowance and tax credits
• interest on National Savings Certificate
• premium bond winnings
The tax rates and reliefs for the following tax year are decided by?
Parliament in the annual Finance Act, which follows the presentation of the budget to parliament each year.
Basic rate taxable income 20% is applicable for first?
£37,700
Higher rate taxable income 40% is applicable for next?
£87,440
Additional rate for taxable income is what percentage?
45%
Additional rate for taxable income of 45% is for over?
£125,140
Income tax on employment income is normally deducted at source by the taxpayers employer under what scheme and paid to who?
Pay as you earn (PAYE) scheme and paid to HMRC
What date do other forms of income need to be declared on the annual tax return?
Paid no later then 31st January
Savings income allowance of first .. tax free for basic, higher and additional
Basic: £1,000
Higher: £500
Additional: no tax free allowance
For dividend income before tax is applicable, what is this number?
£1,000
Tax bands for dividend income: basic, higher, additional.
Basic rate: 8.75%
Higher rate: 33.75%
Additional rate: 39.35%
Can capital losses be used to reduce liability to CGT?
Yes
What gains does CGT not apply to?
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.
How is the capital gains on a equities transaction calculated?
The difference between the sale price and purchase price of the quantity of shares concerned.
Maximum amount into pension per annum
£60,000
What else qualifies as tax free gains for CGT?
• primary home
• Gilts
• cars
• Corporate bonds
In the event of a net loss in a fiscal year, can individuals carry this over and is there a limit?
Yes and the loss can be claimed up to 4 years from the loss occurring
What are the three HMRC matching rules to be followed to identify which acquisitions should be allocated to a sale?
- Acquisitions the same day as the sale
- Acquisitions during the 30 days following the sale first in, first out basis
- Shares bought at any other time.
What is Section 104 holding?
All shares acquired prior to the day of a sale, of the same share class in the same company are pooled together.
How is Section 104 calculated?
Dividing the total amount paid for the shares in Section 104 holding by the number of shares.
Investment gains for CGT are taxed above what amount for residential property? basic, higher, additional
• 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
Who pays the income tax within the wrapper for insurance bonds and to whom is it paid?
Paid by the insurer to their tax authority in the country of domicile.