Income Tax

Question 1

Step one of IT

Answer 1

Calculate total income including trading income

Question 2

How to calculate trading income

Answer 2

Income - expenditure - allowances( writing down and AIA)

Question 3

Step 2 of IT Deduct any reliefs

Answer 3

Loan interest - interest on personal mortgage not deductible
Trading loss
Start up
Carry forward
Carry forward on incorporation
Carry back of terminal loss in last 12 months
Carry back and carry across (1 year)

Question 4

Step 3 of IT

Answer 4

Deduct personal allowances

Personal allowance £12,500
Reduced by £1 for every £2 over £100K and zero over £125,000

12,500(Net income -100,000) divided by 2

Dividend allowance £2000 of 0%

Savings £1000, £500 then none

Question 5

Step 4 of IT

Answer 5

Separate NSNDI, savings and dividends
Tax each
Add together
Is any already paid? Reduce liability by any IT deducted at source (liability v still owed)

Question 6

NSNDI rates

Answer 6

Basic £0- £37,500 at 20%
Higher £37,500-£150,000 at 40%
Additional rate over £150,000 at 45%

Question 7

Savings rates IT

Answer 7

Up to £5000 0%
5000-34,500 at 20%
34,500-150,000 at 40%
150,000 + at 45%

Question 8

Dividend rates IT

Answer 8

Up to 34,500 - 7.5%
34,501-150,000 - 32.5%
150001+ - 38.1%

Question 9

Relief for trading loan

Answer 9

To invest in a close trading company, buy shares, contribute capital or make loan to partnership

Not personal mortgage

£50,000 cap or 25% of adjusted total income

Question 10

Carry forward relief

Answer 10

Carry loss forward indefinitely
Up to £50k or 25% of income
Only business profits not income or capital gains

Question 11

Relief for trading loss

Answer 11

May deduct trading loss from other income to provide relief from tax on that other income

Question 12

Start up loss relief

Answer 12

In first four years a loss can be carried back and set against total income (not capital gains) in previous three years

Earlier year onwards

Must claim by 31 Jan following tax year loss was incurred

Question 13

Carry across and carry back relief (1 year) for trading loss

Answer 13

Set loss against total income for that year or previous year
Claim within 1 year of 31 Jan following tax year of loss
If some loss remains can get against chargeable gains for that year

Question 14

Carry forward on incorporation

Answer 14

Indefinitely against share income

Must be at least 80% shares

Question 15

Carry back of thermal loss in last 12 months

Answer 15

Three years prior

Claim within 4 years