Seminar 1 Flashcards
What are the types of tax in the UK?
- income tax (individuals)
- capital gains tax (individuals)
- inheritance tax (individuals)
- corporation tax (companies)
- value added tax VAT (individuals)
What are the two types of tax?
Indirect & direct
What is the purpose of taxes?
taxes fund governmental public services (e.g., police, ambulance, NHS etc.)
What does PAYE stand for?
Pay as you earn income tax
What is capital gains tax?
tax on the profitable sale of an asset that has appreciated
What is income tax?
tax on your income as an individual
What is corporation tax?
taxes on a companies’ profits
What is VAT?
Value added tax, taxes levied on the sale/purchases of goods/services
How does direct taxes work?
taxes charged on income, profits or gains and are either deducted from the source or paid directly to tax authorities
Who administers these tax laws?
HMRC
What are the main direct taxes?
income tax
capital gains tax
inheritance tax
corporation tax
How are indirect taxes paid?
Indirect taxes are paid to the vendor as part of the purchase price of the item and the vendor then passes the tax on to the tax authorities
How do indirect taxes work?
taxes on spending and are charged when a taxpayer buys an item
What is a vendor?
a vendor is a company or individual offering something for sale
What are the main indirect taxes?
value added tax
customs duties & excise duties
What are the 3 sources of tax law?
statute law
EU Directives
case law decisions taken by judges
what is the tax year for individuals?
- 6th april - 5th april
what are tax years for individuals also referred to as?
“fiscal years” or “years of assessment”
what is the tax year for companies?
april 1st - march 31st
corporation tax years are also known as …
financial years (FYs)
e.g., FY2022 runs from 1 April 2022-31 March 2023
what is HMRC?
HM Revenue & Customs
a body of civil servants headed by the commissioners for revenue & customs
what is self-assessment?
the system used to assess an individual’s liability to income tax is known as self assessment
when must self assessment tax returns be filed?
by 31st october on paper
by 31 january electronically
what does POA stand for?
payment on account
what is tax evasion?
illegal and dishonest way to not pay tax (concealing income information)
what is tax avoidance?
legal and intelligent way to minimise tax burdens (loopholes)
what does GAAR stand for?
general anti-abuse rule
what is GAAR?
HMRC making adjustments to a tax payers’ tax liability to counteract abusive tax arrangements
who are taxable persons?
- UK residents
- non-UK residents pay tax on UK income
- corporations pay tax on profits, not income tax
what are the different classifications for income?
employment income
property income
trading income
interest
dividends
what are exempt income examples?
- ISAs income (individual savings accounts)
- national savings certificates income
- some social security benefits
- premium bond winnings
what are the 3 tax rates?
- basic rate (20% on first 37,700)
- higher rate (40% on next 112,300)
- additional rate (45% above 150,000)
what is the UK personal allowance?
£12,570
personal allowance isn’t available when one’s net income exceeds…
£125,140
personal savings allowance isn’t available when one’s taxable income exceeds…
£150,000
what are the tax rates and allowance for dividends?
Ordinary rate - 8.75%
Upper rate - 33.75%
Additional rate - 39.35%
allowance is up to £2000
what does PSA stand for?
personal savings allowance
what is savings income?
savings income includes income from bank and building society interest, interest on government securities and loan interest
what are the various types of income?
ns - non-savings income (employment)
s - savings income (bank interest, loan interest)
d - dividends income
what is the savings allowance for various tax rate bands?
basic rate band - £1000 PSA
higher rate band - £500 PSA
additional rate band - £0 PSA
what is the starting rate band?
£5,000 of your savings income is tax free for basic rate taxpayers
