Tax Law Flashcards
Self-assessment for tax
Paper return on 31 October the following year, electronic return on 31 Jan the following year, must make two payments on account (jan/jul) each 50% of previous year’s liability with balance owed 31 jan following year
Exempt from tax
Interest from National Savings Certificates, Individual Savings Accounts, winnings, premium bonds, benefits and credits
When do you need to register self-employment?
Within 3 months
How to calculate chargeable income?
Start with gross income, deduct revenue expenses (exclusively for business purposes), deduct capital allowances (AIA, writing down allowances for cars 18%, 6% for longline assets)
What happens when accounting period doesn’t end in tax year?
overlap profits from first year.
Personal allowance?
£12,570, tapered £1 for every £2 income above £100,000
Marriage allowance?
£1,260 transferred, receives 20% of that (£252) - must be married/civil partnership, transferring spouses income must be less than personal allowance, recipient must be a basic rate taxpayer.
Rate bands?
BRB 37,700 (20%) HRB £150,000 (40%) ARB higher (45%)
Personal Savings Allowance
BRB £1000, HRB £500
Dividend Income rates and allowance
7.5, 32.5, 38.1, £2000 available to everyone
Sole trader/partnership losses
- cannot be transferred to spouses
- Set off against total income in current or prior year
- losses can be carried forward and set off against profits (must for next available trading income)
- Transfers business and receives shares, against salary or dividend payments
- If ceases trading, then deduct from current year and carried back three years, taking later years first (LIFO)
Exemptions for CGT
- wasting chattels (life less than 50 years, cars, watches, animals, machinery not used in the business etc.)
- Disposed of for less than £6000
- transfers upon death, between spouses, to charities
How to calculate Capital Gains
Subtract costs incidental - fees, valuation, advertising, defending title, but NOT cost of replacement
Private Residence Relief
100% exempt. Deemed occupation:
1. any reason for three years
2. unlimited if abroad for employment
3. 4 years if absent for work elsewhere
4. last 9 months of ownership
Business Asset Disposal Relief
- business if carried on in business at least two years prior, as well as assets
- shares if owns at least 5% of ordinary voting shares and was an officer of the company for at least 2 years
Taxed at 10% with lifetime limit of £1,000,000
Holdover relief
donor/donee must agree (they pay extra)
1. assets for trade in a company in which at least 5% shares are owned
2. shares in unquoted company
3. shares in personal company
4. assets that qualify for agricultural relief
Incorporation relief
- company is a going concern
- subtracting the gain from the acquisition cost of the company shares
- taxed when shares are disposed of.
EIS (enterprise investment scheme)
defer CGT by investing in qualified unquoted trading companies - pay tax when you sell the shares
Annual exempt amount CGT
£12,300, 10% if does not exceed BRB and 20% after that.
VAT rates:
1. standard
2. food, books, newspapers, water, sewerage, residential construction
3. domestic fuel, energy-saving materials, car seats
4. land, insurance, financial services, education, health and postal services
- 20%
- 0%
- 5%
- exempt
When must a company register for VAT?
turnover exceeds £85,000 within rolling 12-month period or if expected in next 30 days (either within 30 days or before 30 day future period ends)
When can a company deregister for VAT?
if turnover falls below £83,000 in rolling 12-months and MUST within 30 days if it ceases trading
How much VAT payable?
Amount charged (output tax) minus input tax
