Income Tax Comp (revision notes)

Question 1

taxed on….

Children

Answer 1

Taxed on any income they receive after their own PA

Income from parent deemed to be parents income if > £100 GROSS. This includes trusts.

Question 2

3x purchase types

Qualifying loan interest (top half)

Relief after ANI

Answer 2

Deductible in individual tax comp.

Qualifying process:

• Purchase of an interest in a partnership
• Purchase of ordinary shares or issue of loan to close trading companies. [Relief is not available if EIS relief is claimed on shares.]
• Purchase by partner or employee for plant and machinery used in business or performance of duties.

Question 3

5 classes

NIC classes, paid by whom and on what?

Answer 3

(1) Class 1 - Employees
Earnings (gross pay, bonuses, vouchers, excess mileage allowance)

(2) Class 1 secondary - Employers
Earnings

(3) Class 1A - Employers
Non-cash benefits

(4) Class 2 - Sole traders and partners
Flate rate

(5) Class 4 - sole traders and partners
Trading profit assessment

Question 4

Occupational pension scheme contributions relief

Answer 4

(1) Net pay arrangement - Contribution deducted from employment income

(2) Contribtion reduced ANI

(3) Not taxable BIK for employee + no NICs

(4) Deductible from trading profits

Question 5

Personal pension scheme relief

Answer 5

(1) HMRC pay in extra 20% (i.e. gross up 100/80)

(2) Extend bands savings 20/25%

(3) Deduct from ANI

(4) Not taxable BIK for employee + no NICs

(5) Deductible from trading profits

Question 6

Limit on relievable gross contributions

Answer 6

Annual allowance of 40k

Can bring any unusued annual allowance from prior 3 years

if exceeded AA, there is an annual allowance charge

this is taxed at individuals marginal rate

Question 7

Tax free amount, fund amounts vested and excess funds over allownce

Tax when lump sum taken

Answer 7

(1) 25% of lower of fund value

(2) Lifetime allowance of £1,073,100

(3) Taxed as NSI

(4) Lifetime allowance charge of 55%

Question 8

Tax free amount, fund amounts vested and excess funds over allownce

Tax when vested to provide pension income

Answer 8

(1) No tax free amount

(2) No immediate tax charge, but pension income is taxed as NSI

(3) Lifetime allowance charge of 25% AND pensionincome taxed as NSI