Introduction to income tax

Question 1

What income is exempt from income tax?

Answer 1

Interest on National Savings Certificate

ISAs

Betting competitions

Income tax repayment interest

Scholarships

Statutory redundancy pay

Question 2

What is Net income?

Answer 2

Total chargeable income before deducting the PA

Question 3

What is taxable income?

Answer 3

Net income after deduction of the PA

Question 4

How much is the PA for the tax year 23/24?

Answer 4

£12,570

Question 5

What is the PA deducted from?

Answer 5

Non-savings income

Savings income

Dividend income

Question 6

What happens to PA if an individual earns over £100k?

Answer 6

PA is reduced by £1 for every £2 that net income exceeds £100k

No PA above £125,140

Question 7

What does tax liability mean?

Answer 7

The total amount of income tax due from a tax payer

Question 8

What are the different rates of income tax?

Answer 8

Basic rate band - up to £37,700 @ 20%

Higher rate band - £37,700 to £125,140 @ 40%

Additional rate band - over £125,140 @ 45%

Question 9

What is the starting rate band for savings income?

Answer 9

Starting rate band is £5k taxed @ 0%

Only applies to individuals who have <£5k NS

Question 10

What is the savings income nil rate band?

Answer 10

Basic rate taxpayer - £1k @ 0%

Higher rate taxpayer - £500 @ 0%

Additional rate taxpayer - No savings income rate nil band

IN THE TABLES

Question 11

How are dividends taxed?

Answer 11

Dividend nil rate band - first £1k @ 0%

Dividend ordinary rate band - up to £37,700 @ 8.75%

Dividend upper rate band - £37,700 to £150k @ 33.75%

Dividend additional rate band - over £150k @ 39.35%

IN THE TABLES

Question 12

How are gift aid donations taxed?

Answer 12

Basic rate @ 20%, relief at source

BRB = £37,700 + £Donation x 100/80
HRB = £150K + £Donation x 100/80

Question 13

Is the marriage allowance only available to basic rate taxpayers?

Answer 13

Yes