Other stuff Flashcards
Exempt income for income tax
Interest on National Savings Certificates
Income (interest or dividends) from Individual Savings Accounts (ISAs, sometimes called NISAs)
Betting, competition, lottery and premium bond winnings
Some social security benefits such as housing benefit and child benefit
First £7,500 of gross annual rents (rent a room scheme)
Scholarships
Income tax repayment interest
Universal Credit
Apprenticeship bursaries paid to care leavers
Payments made under compensation schemes (eg the Windrush Compensation Scheme)
Define net income in income tax
The total chargeable income before deducting the personal allowance
Define taxable income in income tax
Net income after deduction of the personal allowance.
What is the personal allowance £?
12,570
When do you start losing the personal allowance and at what rate?
100k start
Lose £1 for every £2 over the allowance
Once you reach 125,140 there is none left
What is adjusted net income?
Net income less gross personal pension contributions and gross Gift Aid contributions
What is the blind persons allowance and can it be transfered?
Increase personal allowance by £2,870 and can be transferred to a spouse if they cannot use it
Order of income tax computation
Incomes
Less reliefs - eg loss relief
= Net income
Less personal allowance
=Taxable income
Tax rates and calcs
What savings nil rate band do basic rate tax payers get?
1000
What savings nil rate band to higher rate tax payers get?
500
What savings nil rate bank to additional rate tax payers get?
0
Does savings nil rate band and dividends nil rate band count towards the usage of rate bands?
Yes
What is the dividend nil rate band?
1000 - doesn’t change for tax level
How do you deal with gift aid
Gross up the amount
Add it to the bands
Can you carry back a gift aid donation?
Yes you can carry back to the prior tax year
The election must be done by 31st Jan following end of prior tax year.
Gifts of qualifying assets to charity for income tax
What qualifies?
Shares / securities listed/dealt on stock exchanges
Shares in an open-ended investment company
Units in a unit trust
Holdings in foreign collective investment schemes
Gifts of qualifying assets to charity for income tax
How to calculate the deduction?
The value of the deduction = market value of the shares + costs of disposal less consideration paid by the charity.
Payroll giving schemes How do you deal with them?
Deduct from the income at source so lowers initial income
How is income from jointly owned properties calculated?
Shares equally between spouses by default
A declaration can be made for actual ownership %
Notice must be sent to HMRC within 60 days of the declaration
What is the marriage allowance and when does it apply?
Can elect to transfer £1260 of personal allowance
Applies when transferor has no tax liability or is a basic rate after reduction
AND the recipient is a basic rate payer
Do Scotland and Wales have the right to set their own income tax bands?
Yes
Wales didn’t change
Scotland has different for non-savings
Who gets child benefit?
Adjusted net income of less than 50k gets it
Charge of 1% for each £100 between 50 and 60k
Over 60k don’t get it
The charge is added on to the tax liability
Are interest on loans to buy p & m in a partnership or employment deductible?
Yes for the first three years of the loan
Is interest on a loan to buy an interest in a close company (less the 5 shareholders) or an employee controlled company deductible?
Yes
Is interest on a loan to invest in or lend to a partnership deductible?
Yes
Is interest on a loan to buy shares in or lend money to a co-operative (if you are an employee) deductible?
Yes
Is interest on a loan to pay inheritance tax allowable?
Yes for the first 12 months
What are the three ways property income can be calculated?
(1) Rental income less the property allowance
(2) Rental income received less allowable expenditure paid (cash basis)
(3) Rental income receivable less allowable expenditure payable (accruals basis)
What is the property allowance?
Individual gets £1000 deduction per tax year but then cannot use expenditure
When is the cash basis used as default on property income?
Property receipts not exceeding £150,000
What are allowable expenses of property income?
Legal, professional and administrative costs
Interest paid eg on loans to buy or improve non-residential property
Rates and taxes paid by the landlord eg council tax, water rates
Ancillary services provided by the landlord eg cleaning, gardening
Insurance for the property
Replacement of domestic items such as furniture and furnishings – see later
Repairs and maintenance eg painting, redecoration
Fixed rate reductions for motor vehicles used in the property business (£0.45/mile for the first 10,000 miles and £0.25/mile thereafter). If this is claimed, then no other deduction can be made in respect of motor expenses.
If a property is partly owner-occupied and partly let, expenses relating to periods of owner occupation are not allowable.
When are capital allowances available on property income?
Only on plant and machinery used to repair or maintain a property
What is domestic items replacement relief?
Landlord gets relief on cost of replacing domestic items but not the initial ones.
Finance cost relief for property income calculation
20% of the lower of:
Finance costs this year and brought forward
Property income brought forward after losses
Adjusted total income
Cannot be used as a refund
Property losses can be set against …
the first available future property income
