Income Tax computation

Question 1

How much is the Blind person’s allowance?

Answer 1

2500

-Will increase the PA by 2500

Question 2

In what order is income taxed?

Answer 2

1) Non-Savings income
2) Savings Income
3) Dividend Income

Question 3

What are the rules on the 0% band for Savings income?

Answer 3

IF NO NSI >5000
- 0% on first £5000

if NSI

• Basic 1000
• Higher 500

Question 4

What are the rules on the 0% band on dividend income?

Answer 4

The first £2000 of dividend income is taxed at 0%

However it still uses the other bands

Question 5

What are the rules for tax on gift aid for basic rate tax payers?

Answer 5

• Relief is given at the time of payment by only paying 80% of the total donation
• No adjustment needed

Question 6

What are the rules for tax on gift aid for higher & additional rate tax payers?

Answer 6

• 20% tax relief is granted at the time of payment

- Additional relief is given by extending the basic and higher bands

Question 7

What are the qualifying interest payments purposes that are deductible from total income? (4)

Answer 7

1) loans to buy plant / machinery for use in partnership / employment
2) Loans to buy an interest in a close company / employee controlled company / cooperative
3) Loans to invest in a partnership o make a loan to a partnership
4) Loans to pay inheritance tax

Question 8

How much tax relief can you claim on qualifying interest payments?

Answer 8

Higher of:

1) £50,000
2) 25% of adjusted total income

Question 9

How is adjusted total income caluclated?

Answer 9

Adjusted total income is total income plus payroll giving less gross pension contributions

Question 10

How much is the transferable marriage allowance and what are the rules?

Answer 10

1250

rules:

1) Transferor has no tax liability
2) The recipient is a basic rate tx payer
3) Both individuals born after 1935
4) The transferor must make an election !