Introduction to Income Tax Flashcards
How are children treated with regards to tax?
Taxable like adults
If income generated by gift from parent, seen as income of parent if exceeds £100
What are the 2 types of income?
Chargeable/taxable
Exempt/non-taxable
What are the main types of chargeable income?
Employment
Trading
Renting
Investments
Dividends
Taxable state benefits
Other sources
What income is exempt from income tax?
Interest on National Savings Certificates
Income from ISA
Chance winnings
Social security benefits
Redundancy pay
Scholarships
Tax repayment interest
Apprenticeship bursaries
Compensation
What is included in income received gross?
Trading income
Property income
Interest
Dividends
What are the 3 types of income?
Non-savings
Savings
Dividends
What are net income and taxable income?
NI - chargeable income before deducting personal allowance
TI - net income after deduction of personal allowance
What is personal allowance?
12570 for normal income
12570 - 0.5(x-100000) for income > 100,000
How is net income calculated?
All incomes less deductions and losses
How is income tax liability calculated?
taxable income - tax reducers
How is tax payable calculated?
Tax liability - PAYE deducted
What is the first rule for non-savings and savings income?
The starting rate band for savings income is 0% for the first £5000
What is the second rule for non-savings and savings income?
The nil rate band is:
£1000 @ 0% for basic taxpayer
£500 @ 0% for higher tax payer
0 @ 0% for additional taxpayer
What is the rule for dividend income?
The first £500 @ 0%
How can an individual receive relief from Gift Aid?
Basic rate 20% relief at source
Higher/additional rate relief by extending the bands by the gross donation - donation x 100/80
What is the marriage allowance?
Spouse or civil partner can transfer up to £1260 of personal allowance if:
Transferor has no tax liability/ basic rate taxpayer
Recipient is basic rate taxpayer
1260 x 0.2 = 252 deduction
