Topic 3

Question 1

The personal savings allowance is:

a) not available to additional-rate taxpayers.

b) available only to non-taxpayers.

c) only available to basic-rate taxpayers.

d) available to all taxpayers.

Answer 1

a) not available to additional-rate taxpayers.

Question 2

Juan comes from a long line of Argentinians, but now lives in the UK. For how many years must he have been a UK tax resident to be deemed domicile?

a) A total of 15 years.

b) 15 of the last 20 years.

c) 17 of the last 20 years.

d) A total of 20 years.

Answer 2

b) 15 of the last 20 years.

Question 3

Imran is self-employed. In order to be able to deduct his business expenses from his gross income, they would need to be:

a) wholly, exclusively and necessarily incurred for his trade.

b) wholly and exclusively incurred for the purpose of his trade.

c) allowable by HMRC.

d) exclusively incurred for his trade.

Answer 3

b) wholly and exclusively incurred for the purpose of his trade.

Question 4

Greg is self-employed, with annual profits over the minimum threshold. Which of the following classes of National Insurance contributions will he have to pay?

a) 1 and 2.

b) 2 and 3.

c) 2 and 4.

d) 3 and 4.

Answer 4

c) 2 and 4.

Question 5

HMRC sets out a strict order in which income tax on different types of income is applied. Which of the following is third in that order?

a) Interest.

b) Dividends.

c) Chargeable gains from life assurance policies.

d) Earned income.

Answer 5

b) Dividends.

Question 6

For how many days in a tax year must a person be present in the UK to be considered a UK tax resident?

a) 60.

b) 90.

c) 183.

d) 365.

Answer 6

c) 183.

Question 7

Jayne left her job in January and is about to start another. Her previous employer will have given her a:

a) P30.

b) P45.

c) P60.

d) P75.

Answer 7

b) P45.

Question 8

The starting rate of income tax applies to:

a) dividends.

b) all income for low earners.

c) pension income.

d) interest from savings.

Answer 8

d) interest from savings.

Question 9

Which of the following sources of income is not subject to income tax?

a) War widow’s pension.

b) Share dividends.

c) Redundancy payment in lieu of notice.

d) State pensions.

Answer 9

a) War widow’s pension.

Question 10

Paula is a higher-rate taxpayer who makes a charitable donation through Gift Aid. This means:

a) Paula’s basic-rate income-tax threshold will be extended by the gross amount of the gift.

b) the charity can recover basic- and higher-rate tax Paula paid on the gifted amount.

c) Paula will receive immediate basic- and higher-rate tax relief on the gift.

d) Paula will receive immediate basic-rate tax relief on the gift.

Answer 10

a) Paula’s basic-rate income-tax threshold will be extended by the gross amount of the gift.

Question 11

Class 4 National Insurance contributions are paid by self-employed individuals and are based on their annual profits.

True or False?

Answer 11

True

Question 12

An individual is treated as deemed UK domicile if they have lived in the UK for 15 out of 20 years.

True or False?

Answer 12

True

Question 13

Which of the following people would be most likely to be a ‘UK resident’?

a) Susan, who normally lives in Spain but spends three months a year working for the family business in England.

b) Antoine, a French surveyor, whose eight‑month contract in
Devon with a construction company started in May.

c) Max, who moved to London from Cologne on 6 January for a
seven‑month teaching contract.

d) Brenda, who spends 180 days a year in the UK and the remainder
in the USA.

Answer 13

b) Antoine, a French surveyor, whose eight‑month contract in
Devon with a construction company started in May.

C is incorrect because three months of Max’s contract are in one tax year and the rest are in the following year therefore he will not spend 183 days in either tax year in the UK.

Question 14

Which of the following will not be subject to UK inheritance tax
upon death?

a) UK property owned by Paolo, who has lived in the UK for three years but is not UK domiciled.

b) Overseas property owned by Kavita, who was born in the US (to American parents) but has lived in the UK for the past 18 years.

c) Overseas property owned by Helena, who is UK resident but not UK domiciled nor deemed domiciled.

d) Overseas property owned by David, who is UK domiciled but resident in France.

Answer 14

c) as Helena is not UK domiciled she will not pay IHT on overseas assets.

Question 15

For a child, which of the following would be subject to income tax?

a) All earned income.

b) An educational grant.

c) Any earned income that exceeds their personal allowance.

d) A settlement from their parents.

Answer 15

c) Any earned income that exceeds their personal allowance.

The settlement from their parents would be taxed as the parents income, the educational grant is tax-free and they would not pay tax on all of their earned income, only that which exceeds their personal allowance.

Question 16

A person who is UK resident for tax purposes only pays income tax on earnings generated in the UK.

True or false?

Answer 16

False. They are liable for income tax on income generated anywhere in the world, but the UK has reciprocal tax treaties with many countries to ensure that people are not taxed twice on the same income.

Question 17

A person may become UK domiciled once they have been settled in the UK for a number of years.

True or false?

Answer 17

True.

As long as their actions indicate that the change of residence is permanent and they have severed links with their original country of domicile.

Question 18

Which of the following is not assessable for income tax purposes?

a) Tips.

b) Interest from bank and building society deposits.

c) Lottery prizes.

d) Rents from land and property.

Answer 18

c) Lottery prizes.

Question 19

Blind person’s allowance can be transferred to a spouse or civil partner if the blind person does not use the allowance.

True or false?

Answer 19

True

Question 20

Jenny has taken advantage of the HMRC marriage allowance and had an element of her personal tax allowance transferred to her husband John.

This must mean that:

a. Jenny earns less than her personal allowance and does not pay income tax.

b. Jenny is an additional-rate taxpayer.

c. John is a higher-rate taxpayer.

d. John was registered as blind in the current tax year and earns less than the personal allowance.

Answer 20

a. Jenny earns less than her personal allowance and does not pay income tax.

Question 21

Class 2 National Insurance contributions would be paid by which of the following?

a. A finance director in a firm of management consultants.

b. A self-employed hairdresser operating as a sole trader.

c. An employed administrative assistant earning £12,500.

d. An office cleaner paid £10,000 under the PAYE system.

Answer 21

b. A self-employed hairdresser operating as a sole trader.

Question 22

Class 4 National Insurance contributions would be paid by which of the following?

a. A finance director in a firm of management consultants.

b. A self-employed hairdresser operating as a sole trader.

c. An employed administrative assistant earning £12,500.

d. An office cleaner paid £10,000 under the PAYE system.

Answer 22

b. A self-employed hairdresser operating as a sole trader.

Question 23

Which of the following persons would most likely be considered automatically resident in the UK for tax purposes?

a. Bella, a first-time visitor to the UK, who will spend 180 days in this tax year in the UK developing her Italian-based fashion company.

b. Dmitri, a first-time visitor to the UK, who has a seven-month contract for business consultancy in London, which commenced in January 2023.

c. Luigi, a first-time visitor to the UK, who has a nine-month contract in Essex with a telecoms company, which commenced in April 2022.

d. Sandra, who normally lives in France, but spends two months a year helping on the family farm in Scotland.

Answer 23

c. Luigi, a first-time visitor to the UK, who has a nine-month contract in Essex with a telecoms company, which commenced in April 2022.

Question 24

A reciprocal tax treaty between two countries is designed to:

a. allow an individual to receive any capital gains tax-free in one of the two countries.

b. ensure that individuals are not taxed in full twice on the same income or gains.

c. allow an individual to receive tax-free income in one of the two countries.

d. ensure tax on the full amount of any income or gain is paid in full in each country.

Answer 24

b. ensure that individuals are not taxed in full twice on the same income or gains.

Question 25

William was deemed to be automatically resident in the UK for tax purposes in the previous tax year.

What is the minimum number of days that he must have been in the UK in that tax year?

a. 1 day.

b. 90 days.

c. 183 days.

d. 365 days.

Answer 25

c. 183 days.

Question 26

Diane has been told that she must pay a certain class of National Insurance typically on a twice-yearly basis.

This confirms that she is:

a. earning more than the upper earnings limit.

b. on maternity leave.

c. self-employed.

d. temporarily working abroad.

Answer 26

c. self-employed.

Question 27

James was domiciled in the UK at the time of his death.

His estate for inheritance tax purposes would include all assets:

a. in countries without a double-taxation agreement with the UK only.

b. in the EEA only.

c. in the UK only.

d. wherever they are situated in the world.

Answer 27

d. wherever they are situated in the world.

Question 28

A person’s domicile is best described as:

a. the country that an individual treats as their home.

b. the country where an individual pays taxes on all of their capital gains.

c. the country where an individual pays taxes on all of their income.

d. their residence for tax purposes.

Answer 28

a. the country that an individual treats as their home.

Question 29

Class 4 National Insurance contributions would be paid by:

a. Brian, an employee, who has previously been working abroad and now wishes to build up entitlement to a full state pension.

b. Jack, self-employed, who makes regular profits exceeding the lower profits threshold.

c. Julie, with earnings of £14,000 pa, who is employed by a limited company.

d. Stephanie, a mature student, who wishes to make voluntary contributions in respect of previous low earnings.

Answer 29

b. Jack, self-employed, who makes regular profits exceeding the lower profits threshold.

Question 30

When does a person acquire their ‘domicile of origin’?

a. At birth.

b. At age 16.

c. At age 18.

d. At age 21.

Answer 30

a. At birth.

Question 31

A person has been automatically classed as a UK resident for tax purposes.

This means they:

a. are domiciled in the UK but have lived in the UK for less than 91 days in the last tax year.

b. have been present in the UK for at least 91 days in a tax year.

c. are domiciled in the UK but have lived in the UK for less than 183 days in the last tax year.

d. have been present in the UK for at least 183 days in a tax year.

Answer 31

d. have been present in the UK for at least 183 days in a tax year.

Question 32

Which of the following statements in respect of capital gains tax is true?

a. Gains realised on chargeable assets held within and outside the UK may be subject to capital gains tax on disposal.

b. Investment bonds are subject to capital gains tax because they are classed as unearned income.

c. Losses from a previous tax year may not be offset against gains in the current tax year.

d. The annual exempt amount may be carried forward to be used in a later tax year.

Answer 32

a. Gains realised on chargeable assets held within and outside the UK may be subject to capital gains tax on disposal.