Q: What are the three main types of personal tax in the UK? Flashcards
Q: What are the three main types of personal tax in the UK?
A: Income Tax, Capital Gains Tax (CGT), and Inheritance Tax (IHT).
Term: Personal Allowance
Definition: The amount of income an individual can earn each year without paying Income Tax.
Q: What is the current standard Personal Allowance (as of 2024/25)?
A: £12,570.
Term: Income Tax Bands (2024/25)
Definition: Basic (20%): £12,571–£50,270; Higher (40%): £50,271–£125,140; Additional (45%): over £125,140.
Q: What is the dividend allowance?
A: £1,000 of dividend income taxed at 0% (2024/25).
Term: Capital Gains Tax (CGT)
Definition: A tax on the profit when you sell or dispose of an asset that has increased in value.
Q: What is the CGT annual exempt amount (2024/25)?
A: £3,000.
Term: Inheritance Tax (IHT)
Definition: A tax on the estate of someone who has died, above the nil-rate band.
Q: What is the current IHT nil-rate band?
A: £325,000.
Term: Residence Nil-Rate Band (RNRB)
Definition: An additional IHT threshold for passing on a main residence to direct descendants.
Q: What is the current value of the Residence Nil-Rate Band?
A: £175,000.
Term: Gross Income
Definition: Total income before tax or other deductions.
Q: What types of income are taxable?
A: Employment, self-employment, pensions, savings, dividends, rental income.
Term: Savings Allowance
Definition: A tax-free amount of interest income — £1,000 for basic rate, £500 for higher rate taxpayers.
Q: What is the Marriage Allowance?
A: Allows a non-taxpayer to transfer £1,260 of unused allowance to a basic-rate spouse or partner.
Term: ISA (Individual Savings Account)
Definition: A tax-free savings or investment vehicle.
Q: What is the annual ISA allowance (2024/25)?
A: £20,000.
Term: Tax Wrapper
Definition: A legal structure that shelters investments from tax, such as ISAs or pensions.
Q: Are proceeds from ISAs subject to income tax or CGT?
A: No — they are entirely tax-free.
Term: Nil-Rate Band
Definition: The IHT threshold below which no tax is payable.
Q: What is taper relief in IHT?
A: A reduction in tax payable on gifts made between 3 and 7 years before death.
Term: Chargeable Lifetime Transfer (CLT)
Definition: A gift into a trust that may trigger IHT if above allowances.
Q: What is a potentially exempt transfer (PET)?
A: A gift that becomes exempt from IHT if the donor survives seven years.
Term: Gift Hold-Over Relief
Definition: A deferral of CGT on gifted business assets or shares in certain trusts.
