Income Tax Flashcards
What is considered taxable income?
Taxable income includes:
-earnings from self-employment or from partnerships
-bonuses awarded by an employer
-most pensions income, interest on most savings, bank and building society interest, interest on personal loans
-investment income
-income from shares (dividends)
-rental income
What is non-taxable income?
Non-taxable income includes:
-certain state benefits (including disability living allowance, lump sum bereavement payments, housing benefit)
-income from tax exempt accounts
-maternity allowance
-war widow’s pension etc
What is the marriage allowance?
The marriage allowance enables a person whose income is lower than the Personal Allowance, and whose spouse/civil partner pays income tax at the basic rate, to transfer up to a certain amount of their remaining Personal Allowance in the tax year to their spouse/civil partner.
What is the personal savings allowance?
The personal savings allowance means that basic/higher rate taxpayers don’t have to pay tax on certain amounts of their savings income they receive from banks and building societies.
The personal savings allowance allows basic-rate taxpayers to earn up to £1,000 and higher rate taxpayers to earn up to £500 in savings interest without paying income tax on the interest.
Low earners are eligible for the Starting Rate for Savings Income. This means anyone whose employment earnings are equal to or less than the personal allowance may earn up to an additional £5,000 in savings interest before paying income tax. For each pound over the personal allowance, the starting rate for savings income is reduced by £1.
For each pound over the personal allowance, which is ea
What is the dividend allowance?
The dividend allowance means that individuals don’t have to pay tax on the first certain amount of dividend income they receive, no matter what non-dividend income they have.
What is the dividend allowance?
The dividend allowance means that individuals don’t have to pay tax on the first certain amount of dividend income they receive, no matter what non-dividend income they have.
What is the property allowance?
The property allowance provides a £1,000 tax-free allowance for individuals earning income from property. If the taxpayer’s property income is up to £1,000 they are not required to report the income at all.
What is the trading income allowance?
The trading income allowance provides a £1,000 tax-free allowance for individuals earning trading income from selling goods or providing services. If the taxpayer’s trading income is up to £1,000 they are not required to report the income.
What is Gift Aid?
The Gift Aid scheme is for gifts of money given by taxpayers to charities. The Gift Aid scheme allows for the income tax already paid on the donated amount by the taxpayer to be returned from HMRC, but instead of being returned to the original taxpayer, it is laid directly to the charity.
How is income tax calculated?
Tax is paid on the amount of taxable income remaining after allowances have been deducted.
How is income tax applied with regard to partnerships?
A partnership is not a separate legal person, but a group of individuals. Each partner is required to include his share of partnership profits in his own tax return and is liable for tax on his profit share (only).
What are direct taxes?
Suffered directly by the taxpayer. Charged on income, profits, other gains.
Income tax, CGT, inheritance tax, corporation tax, NI contributions.
What are indirect taxes?
Tax on spending/expenditure. Taxpayer buys item - taxes paid to seller as part of purchase price.
Paid by final consumer.
VAT, stamp duty, customs duties, duties on alcohol, tobacco, petrol.
Direct taxes vs. Indirect taxes:
Direct taxes = taxes on income/tax received
Indirect taxes = taxes on expenditure
Income tax:
Element of recurrence.
Paid by individuals or various businesses on their profits.
