Income Tax / Personal Taxation Flashcards
How much is the personal allowance?
£12,570
How does the personal allowance taper?
At what earnings is the allowance £0?
£1 for every £2 earned over £100,000
Therefore at £125,140 the allowance is £0
The £125,140 figure is adjusted income
What is adjusted net income?
Total income with reliefs added and subtracted to taxable income
What are some reliefs that can be subtracted from net adjusted income?
And how much?
1) Trading Losses
2) Gift Aid
this is limited to £50,000 per year (or 25% of adjusted income if earning over £200,000
What are some reliefs that can be added to net adjusted income?
1) Pension contributions from employer
2) Pension contributions paid gross
What income is tax free (for income tax purposes)
1) NS&I
2) Premium Bonds
3) Gambling (including spread bets)
4) Dividends of VCTs
What is the personal savings allowance for different tax bands?
1) Basic = £1,000
2) Higher = £500
3) Additional Rate = £0
What is the dividend allowance?
£500
zero-rate allowance not a reducer (therefore uses up part of basic rate band)
What other examples of tax relief are there?
1) Self-employed (first £1k tax free)
2) Rental property (first £1k tax free)
What are the UK tax bands and rates?
0-12,570 = 0%
12,571-50,270 = 20%
50,271-125,140 = 40%
>125,141 = 45%
What is mortgage interest relief?
Can claim 20% of your mortgage interest payments against your tax bill
What is capital gains tax?
A tax levied on chargeable persons based on the difference between acquisition cost & disposal value
What is the current exemption for CGT?
for person and trust
£3,000 for an individual
£1,500 for trusts
What are the current CGT rates for higher rate tax payers?
24%
applies to all assets (including property)
What are the current CGT rates for a basic rate tax payer?
18%
applies to all assets (including property)
What is the CGT rate on carried interest?
28%
What are the 6 steps to calculate CGT liability?
1) Determine proceeds
2) Deduct acquistion cost
3) deduct other costs
4) deduct allowable losses
5) deduct annual exemption
6) calculate tax
What is business asset disposal relief? (BADR)
Relieved rate of CGT when selling part or all of a business
What are the qualifying conditions for BADR?
1) Must be part of the business for at least two years
2) Must be an officer or employee of the company
3) if selling shares - must own at least 5%
What is the lifetime limit on BADR?
£1,000,000
What is the releived rate of BADR?
what is happening to it?
10%
Increasing to 14% this year and 18% in 2026
Who pays class 1 national insurance contributions?
Employers & Employees
At what rate do employers pay class 1 national insurance contributions
and on what amount?
13.8% on earnings > £9,100
What rates do employees pay class 1 national insurance contributions at?
0% up to £12,570
8% between 12,571 and £50,270
2% > 50,270
Who pays class 2 and 4 NI contributions and what is the difference?
Paid by the self employed
class 2 is a flat rate whilst class 4 is tiered
What rate are class 2 NI contributions made at?
£3.45 per week (if profits >12,570)
What rate are class 3 NI contributions made at
based on self employed profit
0-12.570 = 0%
12,570-50,270 = 6%
>50,270 = 2%
What are class 3 NI contributions and what rate are they made at?
Class 3 contributoins are voluntary (e.g. to top up state pension)
at a cost of £17.45 per week
Who has to charge VAT?
Businesses who generate more than £90,000 VAT taxable turnover
this is turnover of everything that is not exempt to tax
What are the rates of VAT?
20% = standard rate
5% = reduced rate (e.g. heating fuel)
0% = exempt / 0 rated (e.g. public transport or food)
