Taxation in the UK Flashcards
What is the tax year?
6th April - 5th April
What are the 3 types of taxable income?
- Non-savings income
- Non-dividend savings income
- Dividend income
How is interest paid on corporate bonds, AUTs and OEICs?
NET of basic rate tax (20%)
How is interest paid on income from an annuity?
NET of basic rate tax (20%)
How is interest paid on a gilt?
Gross but can elect to receive net
How is interest paid on an NS&I product?
Gross
How is interest paid on bank and building society income?
Gross
How is interest paid on proceeds on qualifying life assurance policies?
Gross
How is dividend income paid?
Gross
What is the basic tax-free allowance?
£12,570
How does your tax-free allowance change as your salary exceeds £100,000
Reduced by £1 for each £2 over £100,000 and completely lost when income exceeds £125,140
What is the basic tax-free allowance on savings income?
£1000
What is the higher rate tax-free allowance on savings income?
£500
What is the additional rate tax-free allowance on savings income?
No allowance
What is the dividend income allowance for all taxpayers?
£1,000
What are the income tax rates for the below:
Starting rate for savings (no salary):
Basic rate:
Higher rate:
Additional rate:
0%
20%
40%
45%
What are the income tax salary brackets for the below:
Starting rate for savings (no salary):
Basic rate:
Higher rate:
Additional rate:
£0-5,000
£0-37,700
£37,701-125,140
Over £125,140
What are the tax rates of dividend income tax for the below:
Basic rate:
Higher rate:
Additional rate:
8.75%
33.75%
39.35%
The maximum limit of pension contribution tax relief is the higher of:
Relevant annual earnings in a tax year subject to an annual cap of £60,000
A basic amount of £3,600
How does pension contribution tax relief work for salaries above £260,000?
The £60,000 allowance reduces by £1/£2 until it reaches a minimum of £10,000
How does charity donation tax relief work?
Relief at the taxpayer’s marginal tax rate
What are class 1 NICs?
Paid by employees on their earnings
What are class 1A NICs?
Paid by an employer if employee received taxable benefits from their employment, such as a company car
What are class 1B NICs?
Paid by an employer if they have entered into a PAYE settlement agreement with HMRC
What are class 2 NICs?
Paid by self-employed if their earnings are between a small profits threshold and lower profits limit
What are class 3 NICs?
Voluntary contributions that people with very low salaries can pay to help fill gaps on their NIC record
What are class 4 NICs?
Paid by self-employed if they earn over a certain amount each year
What is capital gains tax?
Tax paid on the sale of an asset, such as shares, property, and foreign currency (not for personal use)
What assets are exempt from CGT?
- 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
What are the capital gains tax rates for:
Basic-rate taxpayers
Higher and additional rate taxpayers
10%
20%
What are the capital gains tax rates for:
Basic-rate taxpayers selling residential property
Higher and additional rate taxpayers selling residential property
18%
28%
What is the CGT rate paid on the disposal of certain business assets?
10%
What is the annual exemption for CGT?
£6000
Capital losses can also be deducted from the gains before tax is applied OR carried forward indefinitely
What are some planning strategies for avoiding CGT tax?
- Spouse transfer
- Phased disposal
- Bed and breakfast
When is the hardcopy of tax returns submitted by?
31st October following end of tax year
When is the electronic copy of tax returns submitted by?
31st January following end of tax year
What is the nil rate band for inheritance tax?
£325,000
What is the inheritance tax rate?
40%
What is the inheritance tax rate if > 10% of estate is left to charity?
36%
What is the inheritance tax rate if chargeable lifetime transfers are in excess of nil rate band?
20%
Which items are exempt from inheritance tax?
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
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)
16 days
3 years, 46 days
91 days, 30 days
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
183 days
91 days, 30 days
What are the conditions for a Part C sufficient ties test?
Neither part A or B apply… further tests based on family, work, and accommodation
Define domicile?
Where a person has their permanent home
What is a domicile of origin?
Acquired
What is a domicile of choice?
Can be acquired from the age of 16
Which income/gains are taxed as a UK resident and UK domicile?
Worldwide
Which income/gains are taxed as a non-UK resident?
Income/gains arising in the UK
Which income/gains are taxed as a UK resident and non-UK domicile?
Remittance basis - income/gains are taxed if brought back to the UK
How does inheritance tax work for assets belonging to:
UK domicile:
Non-UK domicile:
UK domicile: Worldwide assets
Non-UK domicile: UK assets
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
0%
5%
10%
12%
Stamp Duty Land Tax (SDLT) is by slice of the purchase price.
Residential:
£0-150,000
£150,001-250,000
Over £250,000
0%
2%
5%
What is the anti-avoidance rate for collective investment schemes and companies buying residential properties valued above £500,000?
15%
What is Stamp Duty Reserve Tax (SDRT)?
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
Which shares are exempt from SDRT?
AIM or AQSE listed shares
Unit trusts
OEICs
ETFs
What rate of corporation tax is applied on profits of £50,000 or less?
19%
What rate of corporation tax is applied on profits of £250,000 or more?
25%
What rate of corporation tax is applied on profits of £50,000 - £250,000?
First £50,000 charged at 19%, rest charged at 26.5%
What can be offset against profit and gains?
Trading losses
How often do large companies (profits > £1.5m) pay their corporation tax?
Quarterly
How often do smaller companies pay their corporation tax?
Nine months and one day after the accounting year end
What is the standard VAT rate?
20%
What is the reduced VAT rate? (e.g. electricity, gas)
5%
What is the zero VAT rate? (e.g. children’s clothes, books) not a trick q
0%
How much VAT is charged for financial advice?
standard rate - except advice on sale of retail investments where VAT is exempt
At retirement, how much of your pension fund can be claimed tax-free?
25%
What is the maximum fund value for a pension allowance?
£1,073,100
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) 25%
b) 55%
What is the annual contribution limit on a stocks and shares and/or cash ISA?
£20,000
What is the annual contribution limit on a junior ISA?
£9,000
Which of income tax or CGT is charged on investments into ISAs?
NEITHER
What are the tax rules for fund collective investment schemes?
Exempt on gains within fund
Income subject to corporation tax at 20%
Where funds hold more than ___ in interest-bearing securities, distributions are treated as interest
60%
What are the tax rules for life insurance funds?
Gains and income subject to corporation tax at 20%
HAVENT INCLUDED LAST TWO SLIDES
