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CEMAP MODULE 1 > TOPIC 3 > Flashcards

TOPIC 3 Flashcards

1
Q

What are 2 taxes mainly affected by residency?

A
  1. Income tax

2. Capital gains tax

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2
Q

How many days of residency in the uk is classed to be a resdient for the tax year?

A

183 days

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3
Q

A person who is resident and domiciled in the UK is subject to tax on what income? Whether or not that income is brought into the UK.

A

World wide earned and unearned income.

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4
Q

What is the purpose of reciprocal tax treaties?

A

Contain agreements to exchange information in order to combat tax evasion

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5
Q

Tax payable on the gain made when certain assets are sold is known as what?

A

Capital gains tax

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6
Q

Give 6 examples of earned income:

A
  1. Profits
  2. Salary
  3. Tips
  4. Comission
  5. Bonuses
  6. Pension benefits
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7
Q

Give 4 examples of unearned income:

A
  1. Interest from investements
  2. Dividends from investments
  3. Rental income
  4. Trust income
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8
Q

What is meant by domicile?

A

The country that an individual treats as their home even if they were to live for a time in another country

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9
Q

Which tax liability does domicile affect?

A

Inheritance tax

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10
Q

What is taxable income?

A

Tax based on income received in a tax year

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11
Q

Give 3 example of income assessable to tax:

A
  1. Salary/wages
  2. Pensions & retirement annuities
  3. Profits from trade or proffession
  4. Inventors income from copy right/patent
  5. Dividends from company
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12
Q

Give 3 examples of income not assessable to tax:

A
  1. Redundancy payments
  2. First £3600 of shares given to an employee as part of a share incentive plan
  3. Interest on NS&I savings
  4. Gift aid payments
  5. Gambling & lottery prizes
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13
Q

What amount is the personal allowance of 2020/21?

A

£12,500

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14
Q

How is PA reduced for amounts over £100,000?

A

The allowance is reduced by £1 for evey £2 over the £100,000 limit

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15
Q

Spouses and civil partners transferring up to 10% of their basic PA when one of them is not liable for tax and the other is not a higher or additional tax payer is known as what?

A

Marriage allowance

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16
Q

A couples tax bill being redcued between £351 and £907.50 if one partner was born before 6 April 1935 is known as what?

A

Married couples allowance

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17
Q

Whats the limit for the starting rate savings band?

A

£5000

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18
Q

Whats the basic rate for income tax?

A

20% of income up to £37,500

19
Q

What is the higher rate income tax?

A

40% of income between £37,501 and £150,000

20
Q

Whats the additional rate of income tax?

A

45% of income earned over £150,001

21
Q

Whats the income limit for personal allowance before any reductions are made?

A

£100,000

22
Q

Whats the limit for no inheritance tax?

A

The first £325,000

23
Q

What is the tax amount for inheritance tax after the nil rate?

A

40%

24
Q

What is the amount for blind persons allowance?

A

£2,500

25
Q

What is the personal savings allowance (PSA) for a basic rate taxpayer?

A

£1000

26
Q

What is the PSA for a higher rate taxpayer?

A

£500

27
Q

What is the allowance for trading and property income?

A

The first £1000

28
Q

List the order or how tax is calculated:

  • dividends tax
  • non savings income
  • savings income
  • non qualifying life assurance policies
A
  1. Non savings income
  2. Savings income
  3. Dividends
  4. Non qualifying life assurance policy
29
Q

What system do employees use to pay tax?

A

PAYE - Pay As You Earn

30
Q

What is a P60?

A

Issued to each employee to show the total tax deducted for the previous tax year, national insurance contributions and the final tax code.

31
Q

What is a P45?

A

On leaving an employer, a P45 is provided to last entries of an employees tax. This will also help the new employor compelte a new tax deductions working sheet.

32
Q

Saira’s income = £27,430
Less personal allowance = £12,500
Taxable income £14,930

What is her final tax amount?
A) £14,930 x 20% = £2,986
B) £14,930 x 0% = £0
C) £14,930 x 10% = £1,493

A

A) £14,930 x 20% = £2,986

33
Q

Michael’s self employed gross profit is £240,000.
Less allowable deductions = -£40,000
Net profit = £200,000

What is michaels taxable income?
A) £200,000 - £12,500 = £187,500
B) £200,000 - £0 = £200,000
C) £200,000 - £100,000 = £100,000

A

B) £2000 as his PA of £12,500 is reduced by £1 for every £2 he earns over £100,000.

34
Q

How is tax calculated for a £200,000 taxable income?
£37,500 x 20% = £7000

A) £112,500 x 40% = £45,000
    £50,000 x 45% = £22,000
B) £62,000 x 40% = £24,800
    £100,000 x 45% = £45,000
C) 200,000 x 45% = 90,000
A

A) 112,500 at 40% as the higher rate tax band is up to £150,000. (£37,500 + £112,500 = £150,000)
Anything above £150,000 is taxed at the additional rate of 45%

35
Q

Calculate the starting rate band:
Income = £13,500

Which means their starting rate band would be:
A) £5000
B) £1000
C) £4000

A

C) £4000 as £13,500 - PA £12,500 = £1000.

Starting rate band of £5000 - £1000 = £4000.

36
Q

What is the PSA for basic, higher and additional taxpayers?

A 
Basic = £1000
Higher = £500
Additional = £0
37
Q

Everyone with the same amount of savings income would be charged the same amount of savings income tax.
True or false?

A

False. The tax due on savings income is calculated with your annual income. The higher your income, the more tax you’ll pay.

38
Q 
Jamies earned income = £12,650
Taxable earned income = £150
Savings income = £2,500
Starting rate band = £5000 
- jamie’s savings income tax is calculated to be £100. True or false?
A

False. Jamie is not subject to any sagubgs income tax:
PA + starting rate band must be over £17,500 to be taxed.
£5000 - £150 = £4850 jamies starting rate band.
£12,500 + £4,850 = £17,350 which is under £17,500

39
Q

Roisin earned income = £29,500
Taxable earned income = £17,500
Savings income = £2,500

Roisin is not eligible for any PSA. True or false?

A

False. £29,500 + £2,500 = £32,000 which is under the basic rate tax band of £37,500 therefore she is eligible for the £1000 PSA.

40
Q

Jodie’s earned income = £49,000
Taxable earned income = £36,500
Savings income = £2,500
Total income = £51,500

This means jodie will pay 20% of £1000 as basic rate (under £37,500) And £1,500 at 40% the higher rate. True or false?

A

False. Jodies total income of £51,500 makes her a hughe rate tax payer. She will get £500 tax free and pay:
£500 at 0%
£500 at 20%
£1,500 at 40%

41
Q

What class of NIC is:

  • paid by employees at 12% of earning between certain levels and upper earnings limit with a reduced level of 2% payable on earnings above the upper limit.
  • paid by employers at 13.8% at the secodnary threshold but with no upper limits.
A

Class 1

42
Q

What class of NIC is:

  • flat rate of contributions paid by the self employed if their annual profits exceed the small profits threshold.
  • are quoted as a weekly amount
  • collected through self assessment
A

Class 2

43
Q

What class of NIC are:

  • voluntey contributions that can be apid by people who would not otherwise be entitiled to the full state pensions or sick benefits.
  • can occur because a person has taken a career break or spent time working overseas.
A

Class 3

44
Q

What NIC class is:

  • additional contributions payable by self employment on annual profits between the minimum and maximum amount levels with reduced rate payable above the upper limit as for class 1.
  • paid to HMRC in half-yearly installments by self assessment
A

Class 4

CEMAP MODULE 1 (3 decks)

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