Tax In The Financial Affairs Of Individuals And Trusts

Question 1

What is the general tax planning strategy

Answer 1

Utilize available allowances and reliefs
Beware additional rate of income tax 45%
Effective marginal rate of income tax 60% on earnings £100k - £125k due to gradual withdrawal of personal allowance

Question 2

What is the most important thing to remember when tax planning

Answer 2

The individuals priorities

Question 3

Why do you need to review investments and tax planning strategies regularly

Answer 3

Governments change tax rules

Question 4

Who needs to disclose arrangements of a tax avoidance scheme

Answer 4

Promoters

Question 5

What do tax payers need to include in their tax return if they are part of a tax avoidance scheme

Answer 5

Scheme reference

Question 6

What are the drawbacks of tax avoidance schemes

Answer 6

Might draw HMRC attention to the individual
Scheme may prove to be ineffective
Government increasingly introduce retrospective legislation

Question 7

What is general anti abuse rule (game)

Answer 7

Special statutory rule that targets tax avoidance schemes which are outside the general tax legislation

Question 8

How can couples and partners reduce tax liabilities

Answer 8

Transferable personal allowance since April 2015
Transfer income between spouses (absolutely)
If couple is not married there could be a cgt liability
Hold savings in joint names

Question 9

Why should couples hold savings in joint names

Answer 9

To retain control but only be taxable on their share

Question 10

How can business and companies mitigate tax liabilities

Answer 10

More scope when a spouse works for the business
Salary between £118 and £166 per week qualifies for state pension without having to pay NIC
Pension contributions are allowable business expense
Share profits by operating a partnership
If Ltd company and not a personal service company then slide or partner can hold shares and receive dividends

Question 11

Who is married couples allowance for

Answer 11

Taxpayers born before 6/4/36

Question 12

What is the threshold for married couples allowance before it gets reduced

Answer 12

£29600

Question 13

What is a child’s personal allowance

Answer 13

£12500 as normal

Question 14

If a child has income in excess of £100 form a gift from parents what is the tax basis

Answer 14

Income is taxed on parent

Question 15

How much is the family element of child tax credit

Answer 15

£545

Question 16

How much is the standard child element of child tax credit

Answer 16

£2780

Question 17

Who pays child tax credit

Answer 17

Hmrc

Question 18

How much is the tax credits reduced by for income over £16,105

Answer 18

41p for everyone £1

Question 19

How can you reduce income to keep child tax credit

Answer 19

Make pension contributions

Question 20

What is the high income child benefit charge

Answer 20

Income over £50,00 per year removes 1% of child benefit for every £100 of excess adjusted net income

Question 21

What is the maximum income before child benefit is withdrawn

Answer 21

£60,000

Question 22

What is adjusted net income

Answer 22

Income after gross pension and gift aid donations

Question 23

Do dividends count as earnings for pension contributions

Answer 23

No

Question 24

What options does a company director have for tax mitigation

Answer 24

Choose bonus or dividends
Consider tax position of share options
Consider taking dividends instead of remuneration
Company cars and free fuel for cars with low co2 emissions may be tax efficient. Oth ER wise check to see if the benefit is worthwhile

Question 25

What things can affect a self employed persons tax liability

Answer 25

Retirement or ceasing to trade

Choice of accounting date

Question 26

When do NIC stop being paid

Answer 26

At state retirement age

Question 27

How can you reduce NIC

Answer 27

Take dividends instead of salary
Increase pension contributions by salary sacrifice
Lump sum bonus instead of taking a salary ( not effective for directors who have a special annual allowance)

Question 28

How often should a will be updated

Answer 28

Every 2 years

Question 29

How long after death is a deed of variation permitted

Answer 29

2 years

Question 30

What needs to be considered when making PET

Answer 30

CGT consequences

Question 31

How can you plan for liability on a PET on premature death

Answer 31

A 7 year decreasing term assurance plan to cover death liability

Question 32

What is the best reason to make a chargeable lifetime transfer

Answer 32

Where it is advantageous to remove the asset from estate but the beneficiary is unknown

Question 33

Which incentive has been removed by making 100% business relief available

Answer 33

Lifetime gifts of family business

Question 34

How can business or agricultural relief be lost

Answer 34

On inter spousal transfers

Question 35

How can you use IHT exemptions

Answer 35

Annual exemption for gifts
Or normal expenditure exemption for premiums on life assurance written in trust, to pay pension contributions or to pay CTF/JISA contributions