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Flashcards in Income Tax Deck (82)
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Who is entitled to a personal allowance against UK income?

UK residents and qualifying non-residents ( residents of the EU,EEA and UK commonwealth and where there is a double treaty arrangement


What happens if you are a non domiciled UK resident and have income of more than £2000 and you are taxed on a remittance basis?

You do not have a personal allowance


How much can be transferred of the personal allowance from spouse to spouse and what is the one criteria?

£1100 (or 10%) of the allowance but it cannot be done if the spouse recipient is not a tax payer


What is the marriage allowance?

If either born before 6 April 1935. It benefits a couple where there is an unused personal allowance and the other is a basic rate tax payer
Maximum saving is £220 0r (£1100 x 20%)


What is adjusted net income?

Annual income less certain deductions, gross pensions and gift aid


What happens to personal allowance when income is over £100000?

It is reduced by £1 for every £2 over
£112000 the personal allowance is £5000 (£11000-£6000)


What is the income rate trap?

If someone has income between £100000-£122000 then they pay effective tax of 60%. They pay at 40% and the loss of the personal allowance is the equivalent of losing a further 20%.


What is the blind person's allowance and is this transferable to spouse?

It is £2290 and additional to the personal allowance
Yes it can be transferred


What is taxable income?

Income after
*certain allowable deductions
*Deduction of a personal allowance


Name some examples of non savings income (5)

*trading income
*employment income
*certain Social security benefits eg state pensions
*income from property


What is the PSA?

Personal savings allowance and this is £1000 for BRT and £500 for HRT. Nothing for additional rate band.


What are the 4 products where the interest is paid net?

Corporate bonds
Fixed interest unit trust


What is the starting rate band and what does it do?

There is a starting rate band of 0% on savings for £5000 of taxable income. This is reduced by any taxable non savings income
If they have £11000 non savings income and £5000 savings income. They will have no tax on the £11000 as this will be covered by personal allowance and the £5000 is covered by the starting rate band.


At what income level does the starting rate band disappear?

When income exceeds £16000 there would be no starting rate band available.


Does a child receive a personal allowance?

Yes and if they have income that exceeds this then they will pay tax to just like adults


If the annual income from all investments is below £100 is this taxed on the child or the parent?

Child - it is taxed on parent if over if £100.


Are income from junior Isas and CTFs included within the rule of the tax of £100 with a child

No they are not included however the interest from a cash ISA if the child is 16/17 then this is included in the rule


If a grandparent funds an investment for the child who pays the tax?

This would be the child


At what level of income does the child benefit start reducing?

At £50000.


How is the high income child benefit charge paid?

Through self assessment


What is the tax charge on the high income child benefit charge?

1% of the amount of child benefit received for every £100 of annual income above £50000. At £60000 this is equal to the amount of benefit that would be received and this is then not paid


If both parents earn over £50000 on which one is the high income child benefit charge paid

It is calculated on the higher one


If I were to own several UK properties how would this be dealt with from an income tax perspective?

All UK property owned by an investor would be treated as one letting business, with income and expenses pooled. Interest on the loans can also be deducted from the income including mortgage interest on buy to lets. (this is disappearing 6 April 2017).


What are the 2 advantages of being self employed over employed?

*Class 4 NiCs paid by self employed are charged a maximum rate of 9%. Class 1 Nics for employed are charged at 12% maximum rate
*The range of business expenses that can be claimed is far more generous for the self employed than the employed


If you provided a contract for services would this be more likely be for self-employed or employed?



If you are to provide a contact of service then would this be more likely for self-employed or employed?



List some of the factors that HMRC may look at to determine whether the individual is employed or self-employed? (6)

* Right of control by the engager - can the engager control how the worker performs services, when and where can they be performed
*If a replacement worker to be sent to do the work then if the individual has to pay these then this would look like they are self employed
*Self employed has their own equipment
*if the worker is to suffer a loss and have to pay for it then this would mean self-employed
*If things go well and the individual gets some money for this then this would be seen as self-employed
* are there employee type benefits as if not then this will be self -employed


Does an accounting period for the self employed have to coincide with the tax year?

No they can choose which every period they want


Net profits are calculated in the tax year, so if the accounting period is different to the tax year, what happens in the first year of trading?

The profits are time apportionated
(in the first year they are divided by the number of months of trading and then for the next tax years the net profits are taxed in the tax year in which the accounting period ends)
Sometimes there is overlap and tax is paid twice and relief is normally given for this in the last year of trading


When deducting expenses from the net profits, what are the rules around the expenses?

That they must have incurred wholly and exclusively for the purposes of the trade