Topic 3 - UK Taxation 1 Flashcards
What are residence and Domicile
Whether or not a person is liable to pay income tax, CGT or inheritance tax is based on their residence or domicile according to UK law
Residence
Mainly affects income tax and CGT. A person who is in the UK for 183 days in any given tax year is a UK resident for tax purposes
Capital gains tax
Tax payable on the gain when assets are sold e.g. properties
Earned income
Income from employment/self employment
Unearned income
Income not from employment e.g. interest, rental income
Domicile
A country an individual treats as their home
Why is domicile important
It mainly affects liability to IHT
If UK domicile, IHT is charged on assets anywhere in the world
If not UK, tax will be charged on UK assets only
If not UK domiciled but lived in UK for tax purposes for 15 years - deemed UK domicile
Personal allowance
An allowance before I come tax is charged - allowance reduced after income threshold increases
Income bands
1-Basic rate - 20% - 0 - 37,700
2-Higher rate - 40% - 37,700 - 150k
3-Additional rate - 45% - 150k +
If income comes from different sources how is tax calculated?
1 - non savings income - earned income
2 - savings income - interest
3 - dividends income
Personal savings allowance
Enables savers to to receive some savings interest tax free. It decreases for high rate tax payers and additional rate payers don’t get it
How do people pay tax on their savings and investments
People on low income have a starting rate of 0% for the first 5K of savings income.
Starting rate band reduces as taxable non savings is received.
No starting rate where income received exceeds someone’s PSA plus starting rate band
National insurance contributions
A tax on earned income, payable in different ways dependant on employed or self employed - split into 4 classes
