Income Tax Part 2

Question 1

Which P11D benefits are wholly or largely exempt from tax?

Answer 1

Group income protection
Provision of meals
mobile telephone (first one)
long-service awards
Staff suggestion schemes
Work-related training

Question 2

Which level of income are P11D benefits which are taxable added to?

Answer 2

Earnings

Question 3

In terms of dates, when are self-employed individuals taxed on profits (that being incorporated businesses)?

Answer 3

From the 2024/25 tax year, the individual will be taxed on the profits arising in the tax year.

o, although a self-employed individual can continue to prepare accounts in line with their accounting period, they will need to apportion the profits or losses to each tax year, allocating the profits in proportion to the number of days within the relevant tax years.

Question 4

What are the payment on account and when are their dates?

Answer 4

First payment on account = 31st January within the tax year in question.

Second payment on account = 31st July following the end of the tax year.

Final balancing payment is due on the 31st January following the end of the tax year (same as the first payment on account)

Question 5

What is payable at each balancing payment?

Answer 5

First payment on account = 50% of previous tax years liability

Second payment on account = 50% of previous years liability

Balancing payment = difference between what is paid on account and due

Question 6

key thing to remember about balancing payment?

Answer 6

It is due on the same date as the first payment on account.

Therefore, when the balancing payment is due, this is also the date of the first payment on account for the next tax year.

Question 7

what is the main condition for high benefit child tax charge to apply?

Answer 7

That you are living with a partner, not that the partner is not married or related to the child.

key is that HBCT is assessed on household income.

Question 8

What is Basis Period Reform?

Answer 8

The new rules dictate that, from 2024/25, all unincorporated businesses will be taxed on the profits generated between the start and end of the tax year, from 6 April to 5 April.

This will apply regardless of the year-end that the business prepares its accounts to.

HMRC will allow a year-end that falls between 31 March and 5 April to be treated as if it falls at the end of the tax year.

So, if a business has an accounting year-end of 31 December, it will have to apportion profits from two accounting periods to fit into the 6 April to 5 April timeline.

These changes will affect all sole traders, unincorporated partnerships and LLPs that currently do not prepare their annual accounts to a reference date ending between 31 March and 5 April.

Question 9

What are overlap profits?

Answer 9

If at any point (including the time before Basis Period Reform) you end up paying tax on the same profit twice in consecutive tax years, this is called overlap profits.

Now under Basis Period Reform, any UK self-employed or trading partnership business will have some overlap profits if their current accounting period isn’t already 31 March to 5 April.

Here is an example:

If you have an accounting year end date of 31 December 2022, you need to report profit from 1 January 2023 to 5 April 2024 in the 2023/24 tax year.

Then you will report profit from both 6 April 2024 to 5 April 2025 in the following tax year