Income Tax Flashcards
What is the criteria for Married Couples Allowance?
Married or in a CP
Living with spouse or CP
One of the couple was born before 6 April 1935 (88)
Marriages after 5/12/2005 = husbands income after that highest earner.
How does Married Couples Allowance work?
Works as tax reducer at 10%
Amounts on tax table so don’t need to learn but need to understand how it works and that it reduces.
If eligible you will get the minimum amount of £4,010 (£401 deducted from bill)
Above this it is Reduced by £1 for every £2 of taxable income above £34,600
What is taxable car benefit?
If car provided by employer is available for private use there is a taxable benefit. Calculated as a percentage based on the co2 emissions of the list price of the car.
Accessories cost included in list price except car phone or adaptations for disability
2% electric only
Hybrid cars based on range
130 miles 2%
70-129 5%
40-69 8%
30 to 39 12%
Less than 30 14%
Co2 emission between 51 and 54 g/km = 15%
16% base pence reaches 55 g/km then 1% steps for each 5G/km to max 37%
(Rounded down)
Diesel 4% supplement if not RDE2
Also benefit where fuel is provided for private motoring, charge is a percentage of a set figure announced each tax year % of set figure £27,800 in 23/24
Use same % as car benefits up to max 37% max charge = £10,286
How are beneficial loans dealt with?
Interest free/cheap loans from employers to employees are taxed as a benefit
Benefit is the difference between the amount of interest at official rate and actual interest (2.25 % 23)
Not taxable if £10,000 or under
More than one loan they are aggregated
Released or written off = the amount treated as taxable benefit
Certain loans qualify for tax relief - investment in partnership or for acquiring shares in a close company = no taxable benefit unless £50,000 or 25% of adjusted total income is exceeded.
How is interest from a PLA dealt with?
Must be grossed up - divide payment by 0.8 when added to total income
Can use relevant PSA
Take of tax at source at bottom of calculation
How are employees assessed on benefit of occupying accommodation provided by employer?
Based on annual value of market rent or cost paid by employer if higher
If owned by employer and cost was more than £75,000 = additional charge of 2% of excess over £75,000
What is an exempt occupation for benefit of living accommodation?
Necessary for proper performance of employee duties = caretaker
Helps employee perform duties better and provision of accommodation customary = publican
Special threat to employee’s security
What are the special income tax rules for a self employed person when business starts?
1st year = based on profits in that tax year - from the date started trading to end of next tax year.
if first accounts end after the end of the tax year only part of profits taxed I.e if started trading in August would be taxed on 8/12ths of profits for the full trading year.
2nd year = based on profits for accounting period ending in tax year if not a full year based on 1st 12 months profits of trading.
3rd and rest = current year basis- profits for the accounting period ending in that year
Relief given for over lap when accounting period changes or business ceases
How much interest can an individual who take out a loan to buy shares on own company/close company deduct from total income?
Capped at the higher of £50,000 or 25% of adjusted total income
If pension contributions deduct this
How is a donation under gift aid treated?
Treated as a payment on which BRT has already been paid.
Charity can reclaim income tax deducted by HMRC
Gross up by dividing by 0.8
How is gift aid treated?
A donation under gift aid is treated as a payment on which BRT has already been paid.
The charity can reclaim the income tax deducted.
Gross up by dividing by 0.8
What tax relief does an individual get for a gift aid donation?
Donors BRT and HRT bands are both increase by the grossed up donation amount.
Must have a tax liability of at least the amount deducted from the donation if not have to pay excess tax deducted to HMRC
Non-tax payers should not use gift aid.
How to work out gift aid tax relief (individual tax)?
Add the amount claimed by the charity 20% to:
The amount saved from his tax band being increased.
If the grossed up donation is £10,000 the the BRT will be increased by £10,000 so will get £2,500 if a ART Total would be £4,500 ie 45%
How do net pay pension contributions affect income tax?
Deducted before calculating tax so tax relief doesn’t need to be claimed.
P60 shows remuneration after deduction of pension payments.
When calculation deduct value of personal contributions from total income to get taxable pay.
How are employee NICs treated for under 21s?
Employer benefits from a 0% band between £175 and upper secondary threshold of £967.
