Interest and Income Tax Computation Flashcards
What interest paid gross on the following can be deducted from total income?
Loan to buy plant and machinery, invest in partnerships, buy interest in employee-controlled company, invest in a cooperative
How is qualifying interest deducted?
From non-savings income first, then non-savings then dividend
What are gilts?
Securities issued by UK government as a way of borrowing money
How is interest paid to holder of gilt?
In fixed amounts on fixed dates
What does accrued income scheme ensure?
Taxpayer who sells a gilt is taxed on any interest income included in the proceeds
How is relief given in accrued income scheme?
To the purchaser of the gilt for the interest included in the price paid
What happens when the interest is paid to the buyer of the gilt?
They are given tax relief by deducting the seller’s accrued income
What happens the closer to the interest date for a gilt?
Gilt is more expensive as investors are willing to pay more for the gilt
What does income tax rules state regarding interest?
It is taxable on individuals when it is received
What happens where an individual holds gilts with a total nominal value of more than £5000 and sells the gilts for a price which includes interest?
Amount of interest which has accrued since last interest payment up to the date of the sale is taxed as savings income on the seller
