Income Tax Flashcards
___ of a deceased person’s estate must pay income tax on _____ of the estate
PRs, income
PAYE - each payroll period, the employer must deduct the appropriate ___ from each employee’s salary, along with NICs for employees earning more than ____ per week
tax, £184
PAYE: On/before each payday, what report must employers send to HMRC which records the money deducted?
Full Payment Submission (FPS)
On what date must FPS and payments made electronically be received by HMRC?
By the 22nd of each month
Self-assessment: electronically filed tax returns must be filed by when?
31 January after the tax year
Self-assessment: paper tax returns must be filed by when?
31 October after the tax year (3 months earlier than electronically)
Taxpayers who self assess usually make 2 payments on account towards the income tax due for any year
When are these due?
- 31 January in the tax year
- 31 July after the end of the tax year
Taxpayers self assessment should be at least what percentage of the previous tax years liability?
50%
For self assessment, if a balance is owed after the first 2 payments, when must it be paid by?
31 January after the tax year
What are the three categories of income?
- Non-savings income
- Savings income
- Dividend income
Give five examples of income that are exempt from tax
- Interest from national savings certificates
- Interest/dividends from ISAs
- Premium bond winnings & other betting winnings
- Social security benefits
- Child benefit/tax credit or working tax credit
How many months do sole traders/partners have to register with HMRC after becoming self-employed/starting their business?
3 months
What is the basic formula for calculating trading income for STs/partners to include in their tax return?
Gross income - Revenue related expenses of the business
When is an expense deductible from the calculation of trading income?
When it’s incurred wholly and exclusively for business purposes
What is an annual investment allowance?
An allowance for a taxpayer to deduct all costs of plant and machinery in the accounting period in which they were incurred.
What is a writing down allowance?
What is the deduction for:
1. Life long assets
2. Other assets
An allowance for a taxpayer if the cost of a capital asset purchased in a year exceeds the AIA
- Life long assets = 6%
- Other assets = 18%
A partner must be nominated to file what with HMRC?
Partnership Tax Return
When do overlap profits occur?
When a business’s accounting period doesn’t align with the tax year
Generally, a business cannot get relief for overlap profits
What are 2 exceptions to this rule
- Changes its accounting date to align with the tax year
- Ceases to do business
What are the three steps to determine an individual’s tax liability?
- Adding up all their income
- Subtracting out any allowances
- Multiplying the income in each category by the tax rate
After determining their gross income, TP will calculate their ___ income by subtracting out _____ paid during the year on certain _____
net, interest, loans
After deducting qualified loan interest to get to their net income, TP calculates their _____ income by deducting any available _______ they may have
taxable, allowances
The personal allowance is ________ by £1 for every £2 of income above £____,_____
tapered, £100,000
What are three conditions that must be met for a marriage allowance to take place?
- Couple must be married/in a CP
- Transferring spouse income must be less than Personal allowance
- Recipient spouse must be a basic rate taxpayer
If marriage allowance conditions are met, transferring S _____ their personal allowance by the amount transferred and the receiving spouse gets a credit against tax owed of ___ of the amount transferred
reduces, 20%
What are the three tax rate bands for non-savings income?
- Basic (20%)
- Higher (40%)
- Additional (45%)
What is the personal savings allowance on savings income for 1. Basic rate TPs and 2. Higher rate TPs
- Basic - £1,000
- Higher - £500
What is the dividend allowance amount and is it available to all taxpayers?
£2,000, yes
What is loss relief?
Where a ST or P’ship has a loss for the tax year, it allows them to offset the loss against other income that would otherwise be taxed
What is the general anti-abuse rule (GAAR) designed to do?
Deter TPs from entering schemes that abuse the tax system and promoters of such schemes
What is the double reasonableness test for GAAR?
HMRC to set aside a tax arrangement if it cannot reasonably be regarded as a reasonable course of action
If a tax arrangement is found abusive, HMRC may make a tax __________ which is just and _______ under the circumstances
adjustment, reasonable
