Income Tax

Question 1

What is income tax

Answer 1

Levied on income received over an exempt personal allowance(tax free granted gov)

Require completed income tax return on annual basis to declare amount income received previous fiscal year / self declaration

Question 2

Income tax in UK

Answer 2

Fiscal year runs 6 April - 5 April / offshore differs 1 Jan - 31 Dec

Administrators should be cautious of different fiscal years for clients

UK income tax is progressive / tax band individuals earning determine rate subject to : basic, high or additional rates

Amount income tax charged depends on wether income earned or unearned, rates & level of income received

Question 3

Outline earned & unearned income

Answer 3

Earned
-income from employment or profession or pension

Unearned
-income received from sources other than employment or trade

• bank interest
• dividends
• corporate bonds/ interred in stocks
• payments
• royalties on rental properties

Question 4

Income tax rates

Answer 4

When income taxes at source taxpayers not required to pay further

However higher payers have more to pay

Savings income taxes at different rates depending on overall income

Basic/ high rates differ per income level

Some investments exempt in U.K (gift aid, premium bonds, ISA income, lottery, gambling & redundancy)