Employment Income - Tax Relief and Tax Planning Flashcards Preview

AAT Personal Tax (2016/17) > Employment Income - Tax Relief and Tax Planning > Flashcards

Flashcards in Employment Income - Tax Relief and Tax Planning Deck (10)
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1
Q

What is the maximum tax relief available for pension contributions?

A

The higher of:

  • £3,600
  • Earnings for the year
2
Q

Can additional pension contributions be made over the tax relief limits?

A

Yes, however these won’t give any tax relief.

3
Q

What are the two types of pension scheme?

A
  • Personal Pension Scheme

- Occupational Pension Scheme

4
Q

What is a personal pension scheme?

A
  • Organised by the taxpayer
  • Contributions made net of tax (20%)
  • Additional relief available for higher & additional rate taxpayers by extending the band.
5
Q

What is an occupational pension scheme?

A
  • Provided by the employer
  • Contributions deducted directly from earnings
  • PAYE then applied to remaining income (called a ‘net pay arrangement’)
6
Q

Are employer contributions to a pension scheme a taxable benefit for the employee and is there a limit to such contributions?

A

No taxable benefit. No limit to contributions an employer can make.

7
Q

What is Give-As-You-Earn (GAYE)?

A

Employee can request that employer pays some of their salary to a charity. Donations are deducted from gross salary before PAYE is applied.

8
Q

What ways can an employee legally reduce their income from employment?

A
  • Choose exempt benefits over taxable benefits
  • Select benefits with lowest cash equivalent
  • Ensure private use contributions are for car, not fuel.
  • Pay in to company pension scheme
  • Make payments to charity under GAYE
  • Claim allowable deductions.
  • Seek rewards in benefits rather than cash - no N.I for employee.
9
Q

In what instance would commuting to work (no van) be an allowable expense?

A

When an employee is seconded to a temporary workplace for less than 24 months.

10
Q

Give 5 specific allowable deductions.

A
  • £4 a week deduction to cover household expenses when working from home.
  • Fees & subscriptions to relevant professional bodies.
  • Business travelling expenses.
  • Occupational Pension Scheme contributions.
  • Donations to charity under payroll deduction scheme.