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IMC Unit 1 > Taxation in the UK > Flashcards

Taxation in the UK Flashcards

1
Q

What is the tax year?

A

6th April - 5th April

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2
Q

What are the 3 types of taxable income?

A
  1. Non-savings income
  2. Non-dividend savings income
  3. Dividend income
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3
Q

How is interest paid on corporate bonds, AUTs and OEICs?

A

NET of basic rate tax (20%)

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4
Q

How is interest paid on income from an annuity?

A

NET of basic rate tax (20%)

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5
Q

How is interest paid on a gilt?

A

Gross but can elect to receive net

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6
Q

How is interest paid on an NS&I product?

A

Gross

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7
Q

How is interest paid on bank and building society income?

A

Gross

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8
Q

How is interest paid on proceeds on qualifying life assurance policies?

A

Gross

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9
Q

How is dividend income paid?

A

Gross

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10
Q

What is the basic tax-free allowance?

A

£12,570

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11
Q

How does your tax-free allowance change as your salary exceeds £100,000

A

Reduced by £1 for each £2 over £100,000 and completely lost when income exceeds £125,140

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12
Q

What is the basic tax-free allowance on savings income?

A

£1000

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13
Q

What is the higher rate tax-free allowance on savings income?

A

£500

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14
Q

What is the additional rate tax-free allowance on savings income?

A

No allowance

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15
Q

What is the dividend income allowance for all taxpayers?

A

£1,000

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16
Q

What are the income tax rates for the below:
Starting rate for savings (no salary):
Basic rate:
Higher rate:
Additional rate:

A

0%
20%
40%
45%

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17
Q

What are the income tax salary brackets for the below:
Starting rate for savings (no salary):
Basic rate:
Higher rate:
Additional rate:

A

£0-5,000
£0-37,700
£37,701-125,140
Over £125,140

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18
Q

What are the tax rates of dividend income tax for the below:
Basic rate:
Higher rate:
Additional rate:

A

8.75%
33.75%
39.35%

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19
Q

The maximum limit of pension contribution tax relief is the higher of:

A

Relevant annual earnings in a tax year subject to an annual cap of £60,000
A basic amount of £3,600

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20
Q

How does pension contribution tax relief work for salaries above £260,000?

A

The £60,000 allowance reduces by £1/£2 until it reaches a minimum of £10,000

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21
Q

How does charity donation tax relief work?

A

Relief at the taxpayer’s marginal tax rate

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22
Q

What are class 1 NICs?

A

Paid by employees on their earnings

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23
Q

What are class 1A NICs?

A

Paid by an employer if employee received taxable benefits from their employment, such as a company car

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24
Q

What are class 1B NICs?

A

Paid by an employer if they have entered into a PAYE settlement agreement with HMRC

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25
Q

What are class 2 NICs?

A

Paid by self-employed if their earnings are between a small profits threshold and lower profits limit

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26
Q

What are class 3 NICs?

A

Voluntary contributions that people with very low salaries can pay to help fill gaps on their NIC record

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27
Q

What are class 4 NICs?

A

Paid by self-employed if they earn over a certain amount each year

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28
Q

What is capital gains tax?

A

Tax paid on the sale of an asset, such as shares, property, and foreign currency (not for personal use)

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29
Q

What assets are exempt from CGT?

A
  • Main home
  • Cars
  • Assets held in ISAs
  • National savings/Investments property
  • Betting and Lottery winnings
  • UK government and most corporate debt
  • Enterprise Investment Schemes
  • Foreign currency for PERSONAL use
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30
Q

What are the capital gains tax rates for:
Basic-rate taxpayers
Higher and additional rate taxpayers

A

10%
20%

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31
Q

What are the capital gains tax rates for:
Basic-rate taxpayers selling residential property
Higher and additional rate taxpayers selling residential property

A

18%
28%

32
Q

What is the CGT rate paid on the disposal of certain business assets?

A

10%

33
Q

What is the annual exemption for CGT?

A

£6000
Capital losses can also be deducted from the gains before tax is applied OR carried forward indefinitely

34
Q

What are some planning strategies for avoiding CGT tax?

A
  • Spouse transfer
  • Phased disposal
  • Bed and breakfast
35
Q

When is the hardcopy of tax returns submitted by?

A

31st October following end of tax year

36
Q

When is the electronic copy of tax returns submitted by?

A

31st January following end of tax year

37
Q

What is the nil rate band for inheritance tax?

A

£325,000

38
Q

What is the inheritance tax rate?

A

40%

39
Q

What is the inheritance tax rate if > 10% of estate is left to charity?

A

36%

40
Q

What is the inheritance tax rate if chargeable lifetime transfers are in excess of nil rate band?

A

20%

41
Q

Which items are exempt from inheritance tax?

A

Potentially exempt transfers (PETS) if donor lives for SEVEN years after gift
Gifts to spouse/civil partner
Gifts to charities
Wedding gifts (up to £5000)
Annual exemption of £3000

42
Q

What are the conditions for a Part A automatically non-resident?
- Visit UK fewer than ___ days in a tax year
- Non resident in previous ___ years and visit UK for fewer than ___ days in the tax year
- Work full-time overseas and visit UK for fewer than ___ days in the tax year (with no more than ___ days working in the UK)

A

16 days
3 years, 46 days
91 days, 30 days

43
Q

What are the conditions for a Part B automatically resident?
Part A doesn’t apply and….
Present in the UK for ___ days or more in the tax year
Own a home in the UK for at least ___ days and lived there for at least ___ days in the tax year
Work full time in the UK

A

183 days
91 days, 30 days

44
Q

What are the conditions for a Part C sufficient ties test?

A

Neither part A or B apply… further tests based on family, work, and accommodation

45
Q

Define domicile?

A

Where a person has their permanent home

46
Q

What is a domicile of origin?

A

Acquired

47
Q

What is a domicile of choice?

A

Can be acquired from the age of 16

48
Q

Which income/gains are taxed as a UK resident and UK domicile?

A

Worldwide

49
Q

Which income/gains are taxed as a non-UK resident?

A

Income/gains arising in the UK

50
Q

Which income/gains are taxed as a UK resident and non-UK domicile?

A

Remittance basis - income/gains are taxed if brought back to the UK

51
Q

How does inheritance tax work for assets belonging to:
UK domicile:
Non-UK domicile:

A

UK domicile: Worldwide assets
Non-UK domicile: UK assets

52
Q

Stamp Duty Land Tax (SDLT) is by slice of the purchase price.
Residential:
£0-250,000
£250,001-925,000
£925,001-1,500,000
Over £1,500,000

A

0%
5%
10%
12%

53
Q

Stamp Duty Land Tax (SDLT) is by slice of the purchase price.
Residential:
£0-150,000
£150,001-250,000
Over £250,000

A

0%
2%
5%

54
Q

What is the anti-avoidance rate for collective investment schemes and companies buying residential properties valued above £500,000?

A

15%

55
Q

What is Stamp Duty Reserve Tax (SDRT)?

A

Tax paid on paperless transactions when an investor buys:
UK listed shares
Foreign shares with a register in the UK
Option to buy shares
Rights arising from shares already owned

56
Q

Which shares are exempt from SDRT?

A

AIM or AQSE listed shares
Unit trusts
OEICs
ETFs

57
Q

What rate of corporation tax is applied on profits of £50,000 or less?

A

19%

58
Q

What rate of corporation tax is applied on profits of £250,000 or more?

A

25%

59
Q

What rate of corporation tax is applied on profits of £50,000 - £250,000?

A

First £50,000 charged at 19%, rest charged at 26.5%

60
Q

What can be offset against profit and gains?

A

Trading losses

61
Q

How often do large companies (profits > £1.5m) pay their corporation tax?

A

Quarterly

62
Q

How often do smaller companies pay their corporation tax?

A

Nine months and one day after the accounting year end

63
Q

What is the standard VAT rate?

A

20%

64
Q

What is the reduced VAT rate? (e.g. electricity, gas)

A

5%

65
Q

What is the zero VAT rate? (e.g. children’s clothes, books) not a trick q

A

0%

66
Q

How much VAT is charged for financial advice?

A

standard rate - except advice on sale of retail investments where VAT is exempt

67
Q

At retirement, how much of your pension fund can be claimed tax-free?

A

25%

68
Q

What is the maximum fund value for a pension allowance?

A

£1,073,100

69
Q

If the maximum fund value for a pension allowance is exceeded, how much tax is charged on the rest if taken as:
a) income
b) lump sum

A

a) 25%
b) 55%

70
Q

What is the annual contribution limit on a stocks and shares and/or cash ISA?

A

£20,000

71
Q

What is the annual contribution limit on a junior ISA?

A

£9,000

72
Q

Which of income tax or CGT is charged on investments into ISAs?

A

NEITHER

73
Q

What are the tax rules for fund collective investment schemes?

A

Exempt on gains within fund
Income subject to corporation tax at 20%

74
Q

Where funds hold more than ___ in interest-bearing securities, distributions are treated as interest

A

60%

75
Q

What are the tax rules for life insurance funds?

A

Gains and income subject to corporation tax at 20%

76
Q

HAVENT INCLUDED LAST TWO SLIDES

A

IMC Unit 1 (6 decks)

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