Pareto Principle Flashcards
What is a progressive tax system?
A system where the tax rate increases as the taxable amount increases.
What is a proportional tax system?
A system where the tax rate remains constant regardless of the taxable amount.
How is adjusted net income (ANI) calculated?
ANI = Total Income - Gross Pension Contributions - Gift Aid Donations
How is the personal allowance tapered for high earners?
Reduced Personal Allowance = £12,570 - (ANI - £100,000) / 2; Personal Allowance becomes zero when ANI > £125,140.
What is the difference between tax deductions and tax credits?
Tax deductions reduce taxable income, while tax credits reduce the amount of tax owed.
How is the income tax liability calculated?
Taxable Income = Total Income - Personal Allowance; Apply tax rates to portions of taxable income within each tax band.
What is the annual exemption for capital gains tax?
The amount of profit you can make from selling assets each year without having to pay capital gains tax, which is £12,300 for individuals.
How is the capital gains tax (CGT) calculated?
CGT = (Proceeds - Cost) - Annual Exemption; Apply CGT rates based on the type of asset and taxpayer’s income.
What is the basic rate of income tax in the UK?
20% on income over the Personal Allowance up to £50,270.
What is the higher rate of income tax in the UK?
40% on income over £50,270 up to £150,000.
What is the additional rate of income tax in the UK?
45% on income over £150,000.
How is the dividend allowance applied?
The first £2,000 of dividend income is tax-free.
What is the standard rate of VAT in the UK?
20%
What is the flat rate scheme for VAT?
A scheme that simplifies VAT reporting for small businesses by applying a fixed percentage to gross turnover.
How is property income assessed?
Property Income = Rental Income - Allowable Expenses (like repairs, agent fees, etc.).
