Income Tax Flashcards
Mortgage interest
Can be offset against income at basic rate(tax reducer)
Amount of income taxed at basic rate taken off total tax bill
Fines for not submitting a tax return
31 January £100 fine for previous year not filed
30 April daily fines of £10 are levied maximum of £900
31 July £300
31 January £300
HMRC non payment
If payment not made by 31 January interest charged
If still outstanding by 31july surcharge of 5%
Is still outstanding by 31 January surcharge of 5%
Employee has contract ….
OF service
Self employed have contract…
FOR service
Key tests that HMRC apply to see if someone is employed or self employed
Control
Substitution
Mutuality of obligation
Adjusted net income
Add up all income exempt ISA income
Deduct pensions contributions paid gross into occupational scheme and trading losses if self employed
This is what is net income
Types of non savings income
Wages/salary/taxable benefits in kind
Profits from self employment
Pension income
Profits from rental income
Types of savings income
Interest from banks / building societies
Interest from gilts/corporate bonds
Interest from unit trusts and OEICS investing in gilts/corporate bonds
Traditional/accural based accounting
To book income when it is delivered even if money hasn’t been paid
Cash based accounting
Income only booked when income is received, so when they are paid not just invoiced. Simpler but business needs turnover of under 300,000
Net pay method
Contributions are deducted gross from gross salary and then they are taxed on balance
Relief at source
Contributions paid net of basic rate tax
Mortgage interest
Can be offset as a tax reducer
Multiply interest by 20% and deduct AT END of calculation
Rent a room scheme to qualify:
Must be part of the resident landlords main home
Must be in the uk
Must be let as a residence
Area let out cannot be self contained
Must be furnished
Owner must be resident in property when it is let out
Marriage allowance
Can transfer 10% of the personal allowance 1,260 to other partner
Must be married
Partner transferring pa must have some unused and other partner must be basic rate payer
Maximum saving is 252 - 1260@20%
Married couples allowance
Available if born on/before 5 April 1935
Amount is 9415, treated as tax reduced
It is reduced by 1 for every 2 above is ANI is greater than 31,400
Can’t fall below 3640
Children and income tax
If money from parents and the annual income is more than £100 then all is taxed on parents
If less than £100 it is taxed on child
0% starting rate amount
£5,000
Non savings up to £17,570
How are onshore bonds taxed
Taxed as income, after non savings, savings and dividends
20% already paid in fund so whatever amount due over this
IR35 explained
HMRC regard as disguised employment
Rules to stop contractors dodging income tax/NIC
Tax charge applies if leave excess profit in company to avoid income tax/NIC
In what instance do you need to send a tax return?
Company director/ minister of religion
Annual income before tax of £100,000+
If you are eligible for child benefit and income more than £50,000
Income from savings/investments of £10,000+ before tax
Untaxed income is more than £2,500
Under/over payments
Employees/pension see can collect by adjusting tax code in following year provided tax less than £3,000
If more than £3,000 outstanding amount must be paid by January 31 following tax year
If overpaid, can request a lump sum refund
Car mileage allowance
Statutory rate paid free of tax and NI - 45p per mile for first 10,000 miles and 25p thereafter
Flat rate 45p for NI
Taxable car benefit
55 grams per km base charge is 15% for registered on or after Apr 2020. 16% for cars registered before then.
Diesel cars subject to extra 4%, max 37% charge
Any amount over 55 rise in 1% per 5 over . So divide total amount over 55 per 5. Then add to 55 charge and diesel charge if needed.
Child benefit tax charge rates and rules
21.15 a week for first child and 14.00 for subsequent ones
Tax free weekly payment to parents of a child under 16
Is lost if EITHER parents has ANI above 60k
If ANI is more than 50k, it is lost at a rate of 1% for ever 100 over 50k
Shared occupancy relief for private residence
If part of property is let and landlord is in shared occupancy then special exemption applies - lettings relief
Gain arising on part that is let is reduced by lowest of - 40,000, amount of gain exempt because house is main residence, gain attributable to the let part or period of letting
