Revision - income tax & self employment

Question 1

Exempt income examples

Answer 1

• ISAs
• National savings certificate
• Minor employee benefits
• ‘rent a room’ up to £7500
• certain pension lump sums
• premium bonds
• social security benefits
• trading & property inc up to £1000

Question 2

Savings income

Answer 2

• usually received gross. If net x 100/80
• £5000 nil rate band if it falls within the first £5000 of taxable income.

Question 3

Personal savings allowance

Answer 3

• £1000 for basic rate
• £500 for higher rate
• £0 for additional rate

Question 4

dividend allowance

Answer 4

£500 for all tax payers at nil rate

Question 5

Badges of trade

Answer 5

• subject matter of transaction
• length of the period of ownership
• frequency of transaction
• supplementary work
• reason for sale
• motive

Question 6

Proforma for tax adjusted net profit

Answer 6

• net profit for yr
  ADD non deductible expenses
  ADD other trading income
  LESS deductible expenses
  LESS non trading income

Question 7

Disallowable expenses

Answer 7

• depreciation
• capital expenditure
• losses on disposal on NCAs
• legal and prof fees on acquisition of NCAs
• motor cars
• fines and penalties
• illegal payments
• political donations

Question 8

allowable expenses

Answer 8

• interest for trade
• trade subscriptions
• non- recoverable VAT
• patent royalties paid for trade
• pre- trading expenses included 7yrs before trade