Income Tax Flashcards
Btl income tax
Annual rental income
Mortgage interest payable
Reduction in mortgage interest allowable 50%
Net rental income on which tax is payable.
Taxed at 40%
20% tax credit of the mortgage interest allowable.
Deduct 20% from the 40% paid.
Net rental income from profit.
Deductions from Income tax
Net pay method contributions to occupational scheme pensions however doesn’t reduce NI.
Charity via payroll
Car allowance - difference in mileage.
Allowable loan interest payments
Interest on IHT borrowing or for business purposes.
ANI used for
For Personal allowance reductions and child benefit tax charge
High Income child benefit charge
ANI not salary.
£50,000 - £60,000. For every £100 over 50k is expressed as a percentage. Based on that percentage you calculate the amount of child benefit that needs to be repaid. IE 100% will need to be repaid if ANI is 60k and above. This is repaid via self assessment and added to the final tax charge.
If husband and wife both earn over 50k the charge is worked out on the higher income.
Payroll charity donations/ net pay pension contributions.
Income is effectively reduced by amount of contribution for ANI purposes and Income tax purposes.
He is taxed on the remaining after this deduction.
Savings him higher rate of tax.
Charity receives the dontation from his employer as a lump sum.
Net pay arrangement pension are treated the same.
Gift aid/ relief at source pension contributions 5k
Must be grossed up for ANI/Income tax.
Pays 80% of the amount to be gifted/contributed.
His basic rate band is extended by gross amount.
Charity/provider will receive initial amount of £4k and charity need to claim the additional 1k.
Furnished property let
Must be situated in UK/EEA
Property must be let on a commercial basis.
It must be available for let to the public at least 210 days in total in the tax year.
The property should be let for at least 105 days in any tax year.
Accommodation may be let for continuous periods over 31 days but such periods must not exceed 155 days in the tax year.
Must be fully furnished.
Benefits for Furnished property let
Income tax
Income regarded as qualifying earnings for pension contributions.
Income called as trading income, so expenses can be fully deducted from profits.
CGT
Lettings would be regarded as a trading company and will qualify for ER on disposal after 12 months.
Rollover relief/ holdover relief/loss relief would be available.
Capital allowances can be claimed and losses can be used to reduce income tax.
IHT
Business relief could be available on death, after 2 years.
Income tax payments
31st Jan (balancing payment) and 31st July POA.
Transferrable Personal allowance
Must be married.
One partner must earn less than personal allowance and have the allowance available to transfer.
Receiving partner must be a basic rate tax payer.
Max can be transferred is 10% of P/A.
Self employed test
A contract to provide services, No set hours, holiday and overtime/sick pay. Agreement for specific amount rather than a regular wage. Ability to refuse work. Ability to sub contract work. If the individual takes business risks. Working for serveral clients. Providing own tools and equipment. Resonsibility for correcting own errors.
VAT registered
Where taxable supplies over 12 months are more than 85,000.
HMRC must be notified within 30 days of end of the month in which limit was exceeded.
Could voluntarily choose to register even if not at threshold.
Failure to notify HMRC in time may lead to penalties.
Double taxation agreement
Double taxation agreements are in place to avoid double taxation of the same income.
Tax paid in one country can provide credit in the other country.
It is possible to be regarded as resident in more than once country for the purpose of tax.
Agreement is made between the tax authorities confirming who should be claiming the tax.
