PT 1 & 2 - Intro to Tax & Calculating Tax

Question 1

Income is categorised into the following sources:

Answer 1

• Trading income;
• Property income:
  – UK
  – non-UK
• Employment income;
• Savings and investment income:
  – interest income
  – dividend income
• Foreign income;
• Miscellaneous income.

Question 2

Some income is exempt from income tax, such as …

Answer 2

• Interest from National Savings (NS&I) Certificates;
• Premium Bonds winnings;
• Income from betting and lotteries;
• Many social security benefits (eg universal credit, housing benefit, winter fuel
  payments);
• Income from ISAs (Individual Savings Accounts);
• Maintenance payments.
• Dividends paid on the first £200,000 of Venture Capital Trust shares acquired in a tax year.

Question 3

Child benefit is not taxable, although a high income child benefit charge applies where a recipient or their partner has adjusted net income in excess of …..

Answer 3

£50,000

Question 4

Exempt social security benefits are listed in …
Taxable social security benefits are listed in ….

Answer 4

ITEPA 2003, s.677.
ITEPA 2003, s.660.

Question 5

Taxable income is calculated by combining all sources of income….

Answer 5

less deductible payments and finally deducting the available personal allowance.

Question 6

The personal allowance is _________ in 2022/23

but where adjusted net income exceeds _______ it is reduced by one half of the excess.

Answer 6

£12,570
£100,000

Question 7

Non-savings income is then subject to UK tax at the main rates in 2022/23 as follows:

Answer 7

• First £37,700 at 20% (basic rate)
• Next £112,300 at 40% (higher rate)
• Rest at 45% (additional rate)

Question 8

List the tax reducers

Answer 8

Less: Tax reducers:
– VCT relief (£200,000 × 30%) (X)
– EIS relief (£1,000,000 × 30%) (X)
– SEIS relief (£100,000 × 50%) (X)
– SIT relief (£1,000,000 × 30%) (X)
– MCA × 10% (X)
– MA × 20% (X)

Question 9

List types of tax deducted at source

Answer 9

– Tax on trust income (X)
– 20% tax suffered on patent royalty received (X)
– Tax paid under PAYE (X)
– 20% tax suffered on interest received net (X)