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Tax Compliance > Income Tax - Individuals > Flashcards

Income Tax - Individuals Flashcards

1
Q

What happens if an individual’s property receipts do not exceed £1000 in the year?

A

No income tax

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2
Q

What is the property allowance?

A

You can elect to take £1000 off your rental income rather than your allowable expenses (which is the automatic thing)

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3
Q

Over how much rental income will a property business definitely use the accruals method?

A

£150,000

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4
Q

How do you work out how much double tax relief to take off UK tax?

A

You work out how much tax they should pay on all income then work out how much they should pay on just UK income. The difference between this is the ‘UK tax on overseas income’. Whichever is lower out of this and actual overseas tax amount is taken off the income tax liability.

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5
Q

How do you account for occupational pension contributions for individuals’ tax?

A

You take it off salary

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6
Q

How do you account for net personal pension contributions?

A

You gross it up and take it off total income

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7
Q

What is the personal allowance for someone that has £107,000 income per year?

A

It is £12,500 - 3500 = £9,000

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8
Q

How do you calculate interest on a loan using the average method?

A

Work out the average amount of the loan in the tax year - literally just take the different values and divide by n, regardless of time scales

The strict method takes account of time scales

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9
Q

If your employer gives you an asset, let’s say a gold PS5. It is worth £500 and they pay Sony £90 to rent it, what is the benefit of the benefit?

A

Higher of value/5 or rental.

£100

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10
Q

Should you take account for private use by an employee of a car or not?

A

No

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11
Q

How is s89 terminal loss relief worked out?

A

Whatever losses are made within the last 12 actual months prior to cessation of business

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12
Q

Does goodwill in a company qualify for rollover relief?

A

No, but goodwill for sole traders or partnerships does qualify for rollover relief

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13
Q

When and how much are you entitled to a savings nil rate band?

A

£1000 if you are a basic rage taxpayer

£500 if you are a higher tax payer

This income is still ‘taxable’ though so contributes to the basic and higher thresholds

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14
Q

Personal allowance is withdrawn completely when you have adjusted net income more than £125k. What is adjusted net income?

A

Net income - gross gift aid donations - gross personal pensions contributions

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15
Q

How does child BENEFIT tax charge work?

A

All child benefit goes if one partner earns over £60k

  • if NET ADJUSTED INCOME (ie net of gross gift aid and pension contributions) is 50-60k then you lose 1% of child benefit for every £100 over £50k
  • if both earn over £50k then the higher income partner loses it
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16
Q

what is a real estate investment trust?

A
  • it is a company that meets certain conditions:
  • they are EXEMPT from corporation tax on PROPERTY income and gains
  • amounts paid out to a shareholder are taxable as property income and are paid net of basic rate of tax at 20%
  • the amount received must be grossed up by 100/80 in the income tax comp.
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17
Q

how much can you pay into a pension tax free every year?

A

£40k - this is subject to tapering for high income individuals

  • this includes both EE AND ER contributions.
  • an individual can carry forward any unused allowance from the previous 3 tax years
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18
Q

what is the max tax free pension lump sum you can have?

A

25% of pension pot with max being 25% of lifetime allowance £1.055m

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19
Q

how do you work out the benefit of living accommodation - assuming it is not job related?

A

basic charge = higher of annual value and rent paid by employer

= additional charge (if accomm cost over £75k): cost-75k x official rate of interest (2.5%)

  • if the employee moved in over 6 years after purchase, use market value when employee moved in instead of cost.
  • deduct any rent made by employees
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20
Q

how do you work out value of car for private use benefit?

A

CO2%* list price

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21
Q

how do y9ou work out the cost of fuel for private use?

A

CO2% * £24,100

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22
Q

what do you do for the CO2% for diesel cars?

A

add on 4%

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23
Q

what is the max CO2%?

A

37%

24
Q

what happens if an employee makes partial contributions for fuel?

A

no money is deducted off the taxable benefit value, all or nothing

25
Q

what is themax. capital contribution deductable from a car list price made by an employee?

A

£5000

26
Q

what happens if benefits are not available for the whole tax year?

A

they are time apportioned monthly

27
Q

what happens if GT loaned me a PS5, I got taxed on it as a benefit and then they gave it to me?

A

I would get taxed as a benefit on the GREATER of market value when given or the market valeu of the aset when provided less any amounts already taxed

if a car, van or bike is given, the current market value is used less any employee contributions

28
Q

with regards to employee loans, when does a benefit arise?

A

when a loan >10k is given at below market rate, this is a benefit

29
Q

How do you work out fuel benefit for the year?

A

£24,100 TIMES the CO2 %

Prorate for months it is unavailable

30
Q

How do you work out the benefit value of a beneficial loan?

A

Official interest rate MINUS the given interest rate

31
Q

If I were to get private medical insurance from GT worth £2,000 and the cost to me getting it myself was £3,000, how much would the benefit be worth?

A

£2,000

32
Q

What do you do with PERSONAL PENSION CONTRIBUTIONS?

A

You times the net value by 1.25 and add them onto the basic and additional rate bands. DON’T TAKE THE AMOUNT OFF THE NSI value.

33
Q

If I was to elect to use the property allowance for the tax year 19/20, when would I need to elect that by?

A

31 Jan 2022

34
Q

What is the remittance basis?

A

It is for individuals who are resident but not deemed domiciled in the UK and have foreign income and gains. It means you are only liable to UK tax on any foreign amounts you remit to the UK.

See tax book for details

35
Q

What capital allowances do you get with the cash basis?

A

NONE!

36
Q

How much car lease amount can you take off profits with the cash basis?

A

100%!

37
Q

In the cash basis, what value should you use in sales when you take stock for your own use.

A

Cost (a just and reasonable amount)

38
Q

What is the maximum interest on a loan expense you can deduct from profits in the cash basis?

A

£500. Over that you can’t deduct.

39
Q

Can you deduct car running costs when using the cash basis?

A

No

40
Q

When you rent a room out, what is the maximum rent a room relief you can use instead of expenses?

A

£7500. Or £3750 each if the property is owned by more than one person.

41
Q

How is adjusted net income calculated for personal allowance purposes?

A

Gross income - grossed up gift aid and - grossed up pension contributions

42
Q

How does set mileage work when it does not match the hmrc amount?

A

If you get paid more than the hmrc amount you pay a bit extra tax, if you get paid less you get a bit of tax to deduct

43
Q

What is a PAYE settlement and how do they work?

A

Where your employer agrees to pay your tax on a benefit

Rhys is a higher rate tax payer. Say Rhys gets £300 for a xmas party, he’d normallly have to pay ALL OF THIS as a taxable benefit (due to staff party). However if his company pay his income tax on the £300 for him then we get a PAYE settlement.

1) gross up benefit by marginal rate of tax - ie the highest tax rate they pay - so that is £300100/60 = £500
2) employer pays IT on benefit - £50040% = £200 and pays NICs on benefit (class 1A)

44
Q

What are the different NIC payments?

A

Class 1 primary - employee pays this on CASH earnings - salary, bonus, excess mileage >45p per mileage, no discount if 25p rate for >10k miles, cash vouchers, forgiven loans (not interest)

Class 1A = non-cash benefits paid by employer

Class 1N = benefits where the employer pays the income tax . Employer pays.

45
Q

Can you deduct pension contributions from NICs?

A

No

46
Q

For people giving the marriage allowance, how is it accounted for on their tax return?

A

Put answer in

47
Q

What are the different methods of domicile?

A

Domicile of:

Origin - father’s birth place

Dependency - where you grow up

Choice - if you choose to move somewhere - must be permanent

Deemed - 15 out of 20 years

48
Q

What are the rules for IT and CGT for UK resident and domiciled, UK resident, non-dom (like Pep Guardiola) or non-resident?

A

IT:

Uk resident - IT on worldwide earnings

Uk res, non-dom

49
Q

How does the remittance charge work?

A

You don’t add it into income, you add it to tax liability

50
Q

What is the class 1 PRIMARY (employee) NIC rate up to higher cut off?

A

12%

51
Q

What rate of class 1 primary NIC does Ian pay on his pension?

A

None as he has reached state pension age!

52
Q

If an employer gets a car for cheaper than the list price, is the benefit value the list price or the employer price?

A

LIST PRICE!

53
Q

HOW DO YOU WORK OUT THE VALUE OF NON-WORK RELATED accomm provided by an employer?

A

Annual value (or rent paid by employer)

PLUS (if it is worth >£75k)

Cost (or market value on moving in if > 6 years since purchase) + any capital improvements made before the start of the tax year the benefit is being calculated for - £75,000 * 2.5%

*if the original cost + improvements are worth

54
Q

What is the domicile rules for income tax?

A

Uk res uk Dom = worldwide income taxable on an arising basis

Uk res non Dom = ww income taxable on arising OR remittance basis

Non res = only UK income

55
Q

How do you work out partnership tax years?

A

If they have been there the whole time then whatever tax year the partnership year end is in is the tax year - easy

If they’ve joined the partnership in the year then need to do opening year rules - i.e tax to next 5 April

Tax Compliance (9 decks)

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