Income Tax Flashcards
5 types of income for tax purposes
Employment (inc. Pens & benefit inc)
Trading
Property Income
Investment (inc savings & Dividend)
Other
Define ‘basis of assesment’
the dates which self employed prepare their annual accounts. Does not have to run parallel with the tax year
what is the ‘tax year basis’
from TY 24/25 the basis of assessment must align with the tax year. 23/24 will be the ‘transition year’
How are additional profits created & taxed due to the transition tax year
may arise as the profits of two years must be combined to align with tax year 23/24. Additional profits can be paid over 5 years (unless self elected for sooner payment)
Which allowance may additional profit reduce?
Personal allowance
Income paid gross with no tax deducted at source? ( 4 x ans)
Bank & BS interest
Unit trust income
OEIS
Investment trusts
when would trust annuity income be tax relievable & how
if the income is paid wholly from gains / profits that are ALREADY subject to income tax, the 20% can be retained by the trust (beneficiary only receives 80%) but the 20% does not need to be paid to HMRC
Annuity income taxable?
Paid net of basic rate tax
what is grossing up?
Income payments which are subject to basic rate are grossed up to determine their tax liability. Although net figs used on Tax return.
Calculation for grossing up
Net fig + 25% or gross fig - 20%
Tax rate reduction on EIS & CVT
30%
Tax rate reduction on SEIS
50%
Cap on loan interest repayments allowable for deduction from income per tax year
higher of 25% of total adjusted income or £50k
Note - loan purpose must meet specific criteria to be deductible
adjusted total income?
total income + charitable donations through payroll giving - pension contributions
