Chapter 9: Taxation (2) Flashcards
What are the main taxes that affect private investors?
- Income tax
- Inheritance tax (IHT)
- Stamp duty
- Capital gains tax (CGT)
What is a domicile?
The country that a person treats as their permanent home, or lives in and has a substantial connection with.
What are the 3 types of domicile?
- Domicile of origin
- Domicile of choice
- Domicile of dependency
What is a ‘Domicile of origin’?
The domicile someone acquires at birth.
What is a ‘Domicile of choice’?
This is acquired by a person residing in a country with the intention of continuing to do so permanently/indefinitely.
What is a ‘Domicile of dependency’?
Arises with respect to children, married women and mentally disordered persons. Their domicile will be the same as the domicile of the person whom they’re legally dependent of.
What areas of law is domicile important for?
It’s the link between a person and the legal system that applies to issues regarding:
* Matrimonial
* Legitimacy
* Succession
* Tax
What is domicile important in determining?
- Who has the right to inherit assets at death.
- The form of any will or testamentary dispositions that are permitted.
- Who inherits if there is no will.
- How much IHT is payable and where.
Which factor decides what tax is paid on what types of income and gains?
A persons residency status.
Which factors influence the definitions of residency?
- Physical residency
- Ownership of property
- Availability of accommodation
What do individuals who are not a resident in an country for a complete tax year need to do?
Exercise particular care in understanding the rules and ensure that their visits do not exceed the maximum time permitted.
In the UK, which income do residents pay tax on?
On all their income, UK or abroad.
Which income do UK residents whose domicile is abroad and non-residents pay?
They only pay on their UK income - don’t pay tax on their overseas income.
What automatically qualifies someone as a UK resident?
- You spent 183+ days in the UK tax year.
- Your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total and spent at least 30 days there in the tax year.
What automatically qualifies someone as a non-resident?
- Spent fewer than 16 days in the UK (or 46 days if you’ve not been classed as UK resident for 3 previous tax years).
- You work abroad full time (avg 35+ a week) and spent fewer than 91 days in the UK, which no more than 30 were working.
What 3 classes is income split into
- Non-savings income
- Savings income
- Dividends income
What is ‘Non-savings income’?
Earnings from employment and pension income.
What is ‘Savings income’?
Interest from bank accounts and bonds.
What is ‘Dividends income’?
Dividends payable by companies and investment funds.
Private investors are liable to pay tax on what?
Income generated from their savings and investments.
What income is taxable for private investors?
- Interest on bank deposits
- Dividends payable on shares
- Income distributions paid by unit trusts
- Interest on government stocks and corporate bonds
How is income taxed on savings and investments?
Income from savings and investments are added to investor’s other income, e.g. salary or pension, and income tax is charged on the total amount after deducting the annual personal allowance. Remaining income is grouped into bands and taxed at different rates.
What is ‘personal allowance’?
Amount of income that each person can earn each year tax-free.
What deductions can an individual make from gross income before tax is payable.
- Contributions made to a personal or corporate pension scheme.
- Charitable donations made by individuals on/after 6 April 2000.
