Income Tax

Question 1

Mortgage interest

Answer 1

Can be offset against income at basic rate(tax reducer)
Amount of income taxed at basic rate taken off total tax bill

Question 2

Fines for not submitting a tax return

Answer 2

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

Question 3

HMRC non payment

Answer 3

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%

Question 4

Employee has contract ….

Answer 4

OF service

Question 5

Self employed have contract…

Answer 5

FOR service

Question 6

Key tests that HMRC apply to see if someone is employed or self employed

Answer 6

Control

Substitution

Mutuality of obligation

Question 7

Adjusted net income

Answer 7

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

Question 8

Types of non savings income

Answer 8

Wages/salary/taxable benefits in kind
Profits from self employment
Pension income
Profits from rental income

Question 9

Types of savings income

Answer 9

Interest from banks / building societies
Interest from gilts/corporate bonds
Interest from unit trusts and OEICS investing in gilts/corporate bonds

Question 10

Traditional/accural based accounting

Answer 10

To book income when it is delivered even if money hasn’t been paid

Question 11

Cash based accounting

Answer 11

Income only booked when income is received, so when they are paid not just invoiced. Simpler but business needs turnover of under 300,000

Question 12

Net pay method

Answer 12

Contributions are deducted gross from gross salary and then they are taxed on balance

Question 13

Relief at source

Answer 13

Contributions paid net of basic rate tax

Question 14

Mortgage interest

Answer 14

Can be offset as a tax reducer

Multiply interest by 20% and deduct AT END of calculation

Question 15

Rent a room scheme to qualify:

Answer 15

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

Question 16

Marriage allowance

Answer 16

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%

Question 17

Married couples allowance

Answer 17

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

Question 18

Children and income tax

Answer 18

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

Question 19

0% starting rate amount

Answer 19

£5,000

Non savings up to £17,570

Question 20

How are onshore bonds taxed

Answer 20

Taxed as income, after non savings, savings and dividends

20% already paid in fund so whatever amount due over this

Question 21

IR35 explained

Answer 21

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

Question 22

In what instance do you need to send a tax return?

Answer 22

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

Question 23

Under/over payments

Answer 23

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

Question 24

Car mileage allowance

Answer 24

Statutory rate paid free of tax and NI - 45p per mile for first 10,000 miles and 25p thereafter

Flat rate 45p for NI

Question 25

Taxable car benefit

Answer 25

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.

Question 26

Child benefit tax charge rates and rules

Answer 26

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

Question 27

Shared occupancy relief for private residence

Answer 27

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