Topic 2 Income Tax

Question 1

If a spouse in a married couple earns below their personal allowance what is the maximum amount of their personal allowance they can transfer to their spouse?

Answer 1

10%

Question 2

10% of personal allowance can only be transferred to a spouse if what?

Answer 2

The partner is not a higher or additional tax payer

Question 3

What is the benefit of having proceeds from a life assurance policy for a basic rate tax payer?

Answer 3

The tax is deemed as being taken at source so no tax is due

Question 4

When may tax be due of the proceeds of a life policy?

Answer 4

If the policy is non-qualifiying

Question 5

How are the proceeds from Unit Trusts paid?

Answer 5

• Annually
• Gross

Question 6

Redundancy payments are free from tax upto what amount?

Answer 6

£30,000

Question 7

How is the tax benefits of a company car calculated?

Answer 7

Car’s carbon dioxide emissions rating equal to a percentage of the car’s list price

Question 8

What are these in relation to employee benefits?

• Readily convertable assets
• Vouchers, credit card, credit tokens
• Non-cash vouchers
• Meeting employee’s private expenses & living accommodation
• Private medical insurance
• Loans made to employee’s at beneficial rates of interest

Answer 8

Taxable Non-cash benefits from employer

Question 9

What are “in house” benefits?

Answer 9

Benefits that are provided to an employee that are generally provided at a reduced rate or fee

Question 10

The tax charge on “in house” benefits is limited to what?

Answer 10

Additional or marginal cost to the employer

Question 11

The types of income are taxed according to 2 different pieces of legislation which are?

Answer 11

• Income Tax (Earnings & Pensions) Act 2003
• Income Tax (Trading & Other Income) Act 2005

Question 12

Which act covers?

• Employment
• Pensions
• Taxable social security benefits

Answer 12

Income Tax (Earnings & Pensions) Act 2003

Question 13

Which act covers

• Trading & self employed income
• Income from property rentals
• Savings & investment income (interest & dividends)

Answer 13

• Income Tax (Trading & Other Income) Act 2005

Question 14

Tax liability is calculated in what order?

Answer 14

1. Earned & Pension income
2. Rental, Savings, Dividend
3. Taxable gains from life policies

Question 15

Scottish tax rate only apply to people who what?

Answer 15

Have close connection to Scotland

Question 16

What is a “Readily Convertable Asset”

Answer 16

An asset that can be turned into money

• Shares
• Gold bullion