Taxation Flashcards
Income Tax Calculation
Calculate gross income
Make allowable deductions to determine adjusted net income
Deduct personal allowance
Calculate any extended BRT or HRT - e.g personal pension contributions
Apply tax at appropriate rate: -
Basic rate
Non savings income @ 20% up to £33,500
Savings income @ 20% up to £33,500 - PSA £1,000
Dividend income @7.5% up to £33,500 - less £5,000 allowance
Higher Rate
Non savings income @ 40% up to £150,000
Savings income @ 40% up to £150,000 - PSA £500
Dividend income @ 32.5% up to £150,000
Additional Rate
Non savings income @ 45% over £150,000
Savings income @ 45% over £150,000 - PSA £0
Dividend income @ 38.1% over £150,000
Credit for tax deducted at source & tax reducers e.g VCT or EIS
Benefits in Kind
P11D employees pay tax on the full value of a benefit - earning over £8,500
Lower paid employees pay tax on 2nd hand value of benefit
Tax is proportioned for time held
Tax is based on CEV - annual value + expenses
The annual value is 20% of the market value when 1st provided to the employee
ER - Class 1A NIC on employee with BIK
Business Mileage
45p for the first 10,00 miles
25p for those above 25p
If the employer pays above this then the excess becomes taxable on the EE
If the employer pays below this then the EE gets tax relief on the unused balance
Self Assessment {sole traders & partners}
31st Jan
Deadline for previous tax year return
Balance payment due - difference between previous year estimate & actual
1st payment on account based on previous year actual
31st July
2nd payment on account
31st Jan {following year}
Deadline for previous tax year return
Balance payment due - difference between previous year estimate & actual
1st payment on account based on previous year actual
Calculation of a taxable gain {CGT}
Establish sale proceeds/market value
Deduct acquisition cost
Deduct any costs incurred
Set off any allowable registered capital losses
Deduct annual exemption
CGT at 10% or 20% + 8% surcharge for residential property
Capital losses {CGT}
Loss is set against gains in the same tax year
Remaining losses can be set against gains in future years
Losses must be claimed within 4 years {register existence not use} of the end of the tax year in which they are made
Once claimed, can be carried forward for an unlimited period
Entrepreneurs Relief {CGT}
Applies to individuals & trustees who dispose of the whole or part of a business or shares in a trading company in which they have a qualifying interest
Must have had that interest for at least one year before disposal
First £10m charged at 10%
Gains in excess of this charged at 10% or 20%
Must be an individual who has at least a 5% shareholding & is also a director, company secretary or employee
Must be a trading company
Holdover Relief {CGT}
Holds over the gain by way of a gift
Avoids paying tax at the time of disposal on trading assets or gifts that attract immediate charge to IHT
No CGT is payable at the time of the gift
Relief only available if donor & donee jointly claim & recipient is resident in UK
Can be used on shares not listed on stock exchange or AIM {5% min holding of ordinary share capital) & qualifying agricultural property
Business Rollover Relief {CGT}
Both companies & unincorporated
Available where business sells assets used in business & buy other assets for the business
Defers gain until disposal of the new assets
Company/business must be trading
Assets sold must be for trading purposes
Sale price must be reinvested in new assets for use of trade
New assets must be bought 1 yr before old asset sold and up to 3 yrs after asset sold
Rollover Relief on incorporation {CGT)
Claimed when an unincorporated business is transferred to a limited company in exchange for new shares in that company
Treated as a disposal at market value
Relief given by deducting gain from issue price of shares
Defer the chargeable gain until shares are disposed of by reducing base cost of shares by the amount of the gain
Reinvestment into EIS {CGT}
Must be made in the period starting 12 months before and ending 3 yrs after the disposal
Gain deferred until disposal of the EIS shares
CGT {personal}
£11,300 annual exemption 10%, 18%, 20% or 28% No indexation permitted Sale costs deducted from proceeds Cost of improvements deductible Entrepreneurs relief available Capital losses carried forward
Chargeable gains {corporate}
No annual exemption 19% Indexation permitted Sale costs deducted from proceeds Cost of improvements deductible No Entrepreneurs relief available Capital losses carried forward - cannot be offset against profits or income
Business Relief {IHT}
Has to be owned for 2 yrs
Must be a trading company
100% relief for sole trader or partnership
50% relief for controlling shareholdings (50%) in fully listed companies or land, buildings, plant machinery used in the business. Not subject to a binding contract for sale
Corporation Tax
Based on specific accounting period basis no longer than 12 months
Straddles a tax year then apportioned - overlap profits
Financial year for CT is 1st April to 31st March
Includes trading profits, investment income and gains
Taxed at 19% or 10% for income from patents & intellectual property
