Income Tax

Question 1

___ of a deceased person’s estate must pay income tax on _____ of the estate

Answer 1

PRs, income

Question 2

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

Answer 2

tax, £184

Question 3

PAYE: On/before each payday, what report must employers send to HMRC which records the money deducted?

Answer 3

Full Payment Submission (FPS)

Question 4

On what date must FPS and payments made electronically be received by HMRC?

Answer 4

By the 22nd of each month

Question 5

Self-assessment: electronically filed tax returns must be filed by when?

Answer 5

31 January after the tax year

Question 6

Self-assessment: paper tax returns must be filed by when?

Answer 6

31 October after the tax year (3 months earlier than electronically)

Question 7

Taxpayers who self assess usually make 2 payments on account towards the income tax due for any year

When are these due?

Answer 7

1. 31 January in the tax year
2. 31 July after the end of the tax year

Question 8

Taxpayers self assessment should be at least what percentage of the previous tax years liability?

Answer 8

50%

Question 9

For self assessment, if a balance is owed after the first 2 payments, when must it be paid by?

Answer 9

31 January after the tax year

Question 10

What are the three categories of income?

Answer 10

1. Non-savings income
2. Savings income
3. Dividend income

Question 11

Give five examples of income that are exempt from tax

Answer 11

1. Interest from national savings certificates
2. Interest/dividends from ISAs
3. Premium bond winnings & other betting winnings
4. Social security benefits
5. Child benefit/tax credit or working tax credit

Question 12

How many months do sole traders/partners have to register with HMRC after becoming self-employed/starting their business?

Answer 12

3 months

Question 13

What is the basic formula for calculating trading income for STs/partners to include in their tax return?

Answer 13

Gross income - Revenue related expenses of the business

Question 14

When is an expense deductible from the calculation of trading income?

Answer 14

When it’s incurred wholly and exclusively for business purposes

Question 15

What is an annual investment allowance?

Answer 15

An allowance for a taxpayer to deduct all costs of plant and machinery in the accounting period in which they were incurred.

Question 16

What is a writing down allowance?

What is the deduction for:
1. Life long assets
2. Other assets

Answer 16

An allowance for a taxpayer if the cost of a capital asset purchased in a year exceeds the AIA

1. Life long assets = 6%
2. Other assets = 18%

Question 17

A partner must be nominated to file what with HMRC?

Answer 17

Partnership Tax Return

Question 18

When do overlap profits occur?

Answer 18

When a business’s accounting period doesn’t align with the tax year

Question 19

Generally, a business cannot get relief for overlap profits

What are 2 exceptions to this rule

Answer 19

1. Changes its accounting date to align with the tax year
2. Ceases to do business

Question 20

What are the three steps to determine an individual’s tax liability?

Answer 20

1. Adding up all their income
2. Subtracting out any allowances
3. Multiplying the income in each category by the tax rate

Question 21

After determining their gross income, TP will calculate their ___ income by subtracting out _____ paid during the year on certain _____

Answer 21

net, interest, loans

Question 22

After deducting qualified loan interest to get to their net income, TP calculates their _____ income by deducting any available _______ they may have

Answer 22

taxable, allowances

Question 23

The personal allowance is ________ by £1 for every £2 of income above £____,_____

Answer 23

tapered, £100,000

Question 24

What are three conditions that must be met for a marriage allowance to take place?

Answer 24

1. Couple must be married/in a CP
2. Transferring spouse income must be less than Personal allowance
3. Recipient spouse must be a basic rate taxpayer

Question 25

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

Answer 25

reduces, 20%

Question 26

What are the three tax rate bands for non-savings income?

Answer 26

1. Basic (20%)
2. Higher (40%)
3. Additional (45%)

Question 27

What is the personal savings allowance on savings income for 1. Basic rate TPs and 2. Higher rate TPs

Answer 27

1. Basic - £1,000
2. Higher - £500

Question 28

What is the dividend allowance amount and is it available to all taxpayers?

Answer 28

£2,000, yes

Question 29

What is loss relief?

Answer 29

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

Question 30

What is the general anti-abuse rule (GAAR) designed to do?

Answer 30

Deter TPs from entering schemes that abuse the tax system and promoters of such schemes

Question 31

What is the double reasonableness test for GAAR?

Answer 31

HMRC to set aside a tax arrangement if it cannot reasonably be regarded as a reasonable course of action

Question 32

If a tax arrangement is found abusive, HMRC may make a tax __________ which is just and _______ under the circumstances

Answer 32

adjustment, reasonable