Income Tax Flashcards
What are the professional rules and practice guidance
- Integrity
- Objectivity
- Professional competence and due care
- Confidentiality
- Professional Behaviour
What ae the threats to compliance?
1.Self-interest threats
2. Self-review threats
3. Advocacy Threats
4. Familiarity Theats
5. Intimidation Threats
What is the financial year?
6th April - 5th April
Pesons will automatically be treated as not resident in the UK when….
They are in the UK for less than 16 days in the tax year
A person in the UK for less than 46 days and not previously a resident
A person who works full time oversees and has not been in the UK for more than 90 days in the tax year
You are automatically a resident if…
The persons only home is in the UK
The perosn carries out full time work in the UK
What are the UK ties?
- Spouse/Civil partner or minor child in the UK
- House in the UK which is used during the tax year
- In UK for more than 90 days in either of 2 previous tax years
- More time in the UK than in an other country in the tax year
- Doing substantive work in UK
What are the key dates for self- assessment tax returns
31st Oct follwoing the end of a tax year (paper return)
31st January at the end of the tax year (filling online)
What is the penalty system for self-assessment?
automatic fixed pentalty of £100
£10/day for next 3 mnths
6 months late = 5% of tax due or £300 (bigger amount)
What is the payment system for self-assessed income tax payments?
1st payment = 31st Jan in tax year
2nd payment = 31st July after tax year
Balancing payment = 31st Jan after tax year (50% from tax teae + mis
takes + under/over payment
Who can claim Maried Couple Allowance (MCA)
MCA tax reducer is calculated at a fixed rate of 10% of the relevent MCA amount
Married after 5th December 2005
MCA is cliamed by tghe spouse who has a higher net income
MCA is claimed if spouse is born before 6 April 1935
Given in Tax sheet:
After £34,600 MCA is dedcuted by £1 for eery £2 but minum allowance is £4010
What is Marriage Allowance
Giving 10% of personal allowance to spouse
Transferor -Spouse must have no tax liability or be basic band AFTER marriage allowance reduction
Recipient - must be a basic rate taxpayer
Cannot claim for MCA and MA
How do you calcuate gift-aid
The basic rate band is extebed by 125% of the gift-aid
For a higher rate oater - tax relief at higher rate
for an additional rate tax payer - tax relief at additional rate
Child Benefit Income Tax Charge
idk man
What are the types of pension schemes? And who is each scheme for?
- Occupational Scheme - Employees
- Personal Pension Scheme - Person directly to pension providor and seld-employed people
How do Occupational Schemes work?
- contributions bmade by employer
- maybe contributions made by employee
- no limits on amount by employer
- contribution will count towards employee’s annual allowamce
- and value of the fund of the lifetime allowance
- contributions are tax deductible
contributions exempt from NIC payments
What are the rueles of personal pension scheme
will be tax exempt unless:
- it is higher than their relevent earnings
- and is a £3,600 gross contribution
Rules for when employee makes contribution into an occupational scheme
Employer will deductthe gross contribtion from individuald employment income before computing tax under PAYE
How is Tax relief given to personal pension schemes
Basic Rate Relief - Given at source so HMRC adds 20% of pension into pension scheme too
Higher and additional - Extend the basic and higher rate band by gross amount added
Therefore add £1000, basic and additional bands increase by £1000
What is Anual Allowance (AA) and how does it work?
AA given in tax sheet
It is total pension input allowed for tax relief each year
If AA is not fully used, it can be carried forward for 3 years
If AA exceeds limit, it is chargeable to income tax (£1 for every £2, rules on tax sheet)
What is annual Allowance Charge
Annual Allowamce Charge is treated as an additoonal non-savings incomeW
What is lifetime allowance?
Value of £1,073,100 (in tax sheet) that applies to value of pesnion fund built up at the date taxpayer takes their pension
Abolished for 2024/25 tax year onwards
What are the rules in the fully furnished residential property?
- Normal capital allowances not given
- Replacement furniture relief for like for like furnishings
- Relief is available for revenue expenidture incurred before lettings commenced
What are the rules for furnished holiday lettings availability
- Has to be available 210 days in the year
- Has to be let 105 days
- The same tenant cannot stay for longer than 31 days
What are the tax provisions for furnished holidays
- Treat as trading income
- Can deduct normal capital allowance calculated in the normal way
- Loss relief can be claimed as normal
- Capital Gains Tax reliefs is also available
What are the rukes for the rent a room scheme
- Can rent for up to £7,500/year tax-free
- Split between all rooms in the house if tehre is more than one
- Has to be furnished
- Cannot have its own enterance
- Gross rents greater than £7,500 are taxable as:
- either oay tac on execess rent
- pay tax on gtoss rents less expenses
What happens to rent paid to non-residents
Basic rate income tax must be deducted at source from the rent payments and accounted for and to HMRC
- unless a registered UK letting agent handles the collection
What is property allowance?
- If property income is below £1,000 (excluding rent-a-room) then their relevent property business profits or loses are treated as nil
- If greater than £1,000 then they can minus it from taxable recipets
What is a Lease Premium?
One off capital at commencement of lease period
If lease is less than 50 years, then use formula:
What is the Lease Premium formula?
P - [P (L - 1) 2%]
P = lease premium
L = duration of lease
What are the rules for travel expenses?
Travel from home is allowed if it is to a temporary place p0f work or if you starta business journey from home
Travel between different centres of employment is allowable
Max untaaxable amount = £8,000
What are thr rules for payments on termination of employment
Exempt payments - accidental death, injury or isbailitym lump sums from apporved pension scehemes, state redundancy payments
Termination paymenys are partly exempt (first £30,000)
What are beniifts in kidn?
Non-wage recipets in return for labour
What are the accomodation beniifts if the accomodation is rented by employer and is job related
Annual value is exempt + cost of ancilliary service or bills paid by employer capped to 10% of annual slaary - any employee contributions = Answer added to his income
WHat are the accomodation benifits if it is owned by employer for less than 6 years
Annual Value of property
+ cost of ancilliary servoces or bills paid by employer
+ 20% x cost of any loaned furnityre by employer
+ Extra charge for luxury properties (>£75k) as following (Ihstorical cost up to relevnet hyear - £75k) x 3%
What are the accomodation beniifts if the accomodation is rented by employer but not job related
Taxable Benifit = Higher of annual value and annual rent + cost of ancilliary services or bills paid by employer - any employer’s contributions
What are the accomodation benifits if it is owned by the employer for more than 6 years
Annual value of property
+ cost of ancilliary services or bills paid by employer
+ 20% x cost of any loaned furniture by employer
+ extra charge for lucury properties (>75k) as following (MArket vlue at relevent year - 75k) x 3%
What is the difference between accomodation owned by employer for more than and less than 6 years
If it is owned by mre than 6 years, then market value price is used
If owned less than 6 yeas rgen historical cost is used
What is teh formula used for car benifit?
(list price + accessories - capital contributions) x %
Max capital contributions = £5,000
How do the opercenatges change for disel cars?
For disel cars that are not cerifiied to the RDE2 standrds, the formula is +4% to percntage, up to a max of 37%
When is car benifit reduced?
WHen a motor car is unavailabke for oeriods of at least 30 days of the tax year
where the employee makes a contribution to the employer for the use of a motor car
What is the rules for a pool car?
If theee us ni private use of the car there is no taxable benifit
What is the formula for car fuel benifit?
Formula used unless the fuel is fully reimbursed:
Fuel beniift = £27,800 (fixed) x table %
What is the beniift amount for vans
3,960
Must be for tine appointed (months used/12)
Must be reduced by any amount paid by the employee for private use
What is he seperate charge for the provision by the employer of fuel for a private used of van
Annual amount = £757
no reduction is the van fuel amount if emloyee makes partial contribution
