Income tax Flashcards
Name two examples of income ignored for tax purposes.
ISA income
VCT income
Rent-a-room
NS&I Premium Bond winnings
Redundancy payments up to £30,000
In what position of ‘ESDL’ are offshore life assurance bonds taxed?
At the end of the savings category after all other savings income has been added
In what position of ‘ESDL’ is the excess over £30,000 from a redundancy payment taxed?
After dividend income but before chargeable gains
Who is still able to use childcare vouchers?
Those who applied before 04/10/2018, provided they don’t move job or stop payments for a year.
What is the maximum amount of salary that can be given up for childcare vouchers per parent?
£55pw BRT
£28pw HRT
£25pw ART
True or false? Expenditure on a rental property to improve its eventual sale price can be used as a deductible rental cost.
False
What is the maximum deduction an individual can get from interest payment relief?
25% of individuals adjusted total income
OR
£50k
What is the calculation for adjusted total income?
Total annual income + amount given under payroll giving - gross pension contributions
Name examples of employee benefits that are wholly or largely exempt for income tax purposes.
-Group income protection
-Provision of meals
-Mobile phone
-Long service awards up to a maximum of £50 per year of service
-Staff suggestion schemes
-Work-related training
-Relocation & removal expenses up to a max of £8k
-Home working
-Workplace childcare
-Liability insurance
What is the “taxable cash equivalent” value of a benefit?
The cost to the employer of providing the benefit, less any employee contributions
How is taxable car benefit calculated?
-% of the list price
-2% for EVs and hybrids > 130 mile range
-15% for non-EVs with CO2 emissions 51<x<55 g/km
-16% for non-EVs with >55g/km CO2
-Extra 1% for each additional 5g/km CO2
-Max rate 37% for non-EVs with >160g/km
How are classic cars taxed as a company car?
Cars older than 15yo are taxed at market price, rather than list price
How much contribution can the employee make towards a company car?
£5,000
How is the taxable value of fuel calculated on a company car?
Based on % value of £27,800
What are the mileage limits for non-taxable reimbursement of work-related use of an employee’s private vehicle?
45p/mile (1st 10k miles)
25p/mile thereafter
What is the position of benefits in kind with regards to employer & employee NICs?
Employee - not liable to NI
Employer - pays class 1A NI
What are three examples of benefits in kind?
-Company car
-Beneficial loan
-Living accommodation
How is the benefit in kind calculated for beneficial loans?
-Must be over £10k
-Difference between actual interest rate and HMRC’s official rate (2.25%)
How is the benefit in kind calculated for living accommodation?
Either:
-annual rental value
OR
-excess cost over £75k multiplied by official interest rate
When are the “Payment on Account dates”?
31st Jan - 1st PoA (50% of last TY’s bill)
31st July - 2nd PoA (50% of last TY’s bill)
31st Jan - Balancing payment
Rob has the following:
-Accounting profits of £60,000 each year.
-Overlap profits of £20,000 to use.
-Accounting period ends 31 October.
What would be his taxable profit for 2023/24 TY?
- Standard part profit: £60,000
- Transition part profit: (60000*[156/366]) = £25,573.77
- Deduct overlap profit from transition part: £5,573.77
- Add (1) and (3): £65,573.77
- Total transitional profit. This is the lesser of (3) or (4) divided by 5: 5,573.77/5 = £1,114.75
- Taxable profit for basis period. Either (5) if (1) =<0 or (5)+(1): £61,114.75
True or false? Transitional profits are not included when looking at the impact on the high income child benefit charge.
True
True or false? A property owner can claim expenses if utilising the property allowance.
False
How does mortgage interest tax relief work?
-Annual amount paid in mortgage interest multiplied by 20%
-This is then subtracted from any income tax due.
