Seminar 1

Question 1

What are the types of tax in the UK?

Answer 1

• income tax (individuals)
• capital gains tax (individuals)
• inheritance tax (individuals)
• corporation tax (companies)
• value added tax VAT (individuals)

Question 2

What are the two types of tax?

Answer 2

Indirect & direct

Question 3

What is the purpose of taxes?

Answer 3

taxes fund governmental public services (e.g., police, ambulance, NHS etc.)

Question 4

What does PAYE stand for?

Answer 4

Pay as you earn income tax

Question 5

What is capital gains tax?

Answer 5

tax on the profitable sale of an asset that has appreciated

Question 6

What is income tax?

Answer 6

tax on your income as an individual

Question 7

What is corporation tax?

Answer 7

taxes on a companies’ profits

Question 8

What is VAT?

Answer 8

Value added tax, taxes levied on the sale/purchases of goods/services

Question 9

How does direct taxes work?

Answer 9

taxes charged on income, profits or gains and are either deducted from the source or paid directly to tax authorities

Question 10

Who administers these tax laws?

Answer 10

HMRC

Question 10

What are the main direct taxes?

Answer 10

income tax
capital gains tax
inheritance tax
corporation tax

Question 10

How are indirect taxes paid?

Answer 10

Indirect taxes are paid to the vendor as part of the purchase price of the item and the vendor then passes the tax on to the tax authorities

Question 10

How do indirect taxes work?

Answer 10

taxes on spending and are charged when a taxpayer buys an item

Question 11

What is a vendor?

Answer 11

a vendor is a company or individual offering something for sale

Question 12

What are the main indirect taxes?

Answer 12

value added tax
customs duties & excise duties

Question 13

What are the 3 sources of tax law?

Answer 13

statute law
EU Directives
case law decisions taken by judges

Question 14

what is the tax year for individuals?

Answer 14

• 6th april - 5th april

Question 15

what are tax years for individuals also referred to as?

Answer 15

“fiscal years” or “years of assessment”

Question 16

what is the tax year for companies?

Answer 16

april 1st - march 31st

Question 17

corporation tax years are also known as …

Answer 17

financial years (FYs)

e.g., FY2022 runs from 1 April 2022-31 March 2023

Question 18

what is HMRC?

Answer 18

HM Revenue & Customs

a body of civil servants headed by the commissioners for revenue & customs

Question 19

what is self-assessment?

Answer 19

the system used to assess an individual’s liability to income tax is known as self assessment

Question 20

when must self assessment tax returns be filed?

Answer 20

by 31st october on paper
by 31 january electronically

Question 21

what does POA stand for?

Answer 21

payment on account

Question 22

what is tax evasion?

Answer 22

illegal and dishonest way to not pay tax (concealing income information)

Question 23

what is tax avoidance?

Answer 23

legal and intelligent way to minimise tax burdens (loopholes)

Question 24

what does GAAR stand for?

Answer 24

general anti-abuse rule

Question 25

what is GAAR?

Answer 25

HMRC making adjustments to a tax payers’ tax liability to counteract abusive tax arrangements

Question 26

who are taxable persons?

Answer 26

• UK residents
• non-UK residents pay tax on UK income
• corporations pay tax on profits, not income tax

Question 27

what are the different classifications for income?

Answer 27

employment income
property income
trading income
interest
dividends

Question 28

what are exempt income examples?

Answer 28

• ISAs income (individual savings accounts)
• national savings certificates income
• some social security benefits
• premium bond winnings

Question 29

what are the 3 tax rates?

Answer 29

• basic rate (20% on first 37,700)
• higher rate (40% on next 112,300)
• additional rate (45% above 150,000)

Question 30

what is the UK personal allowance?

Answer 30

£12,570

Question 31

personal allowance isn’t available when one’s net income exceeds…

Answer 31

£125,140

Question 32

personal savings allowance isn’t available when one’s taxable income exceeds…

Answer 32

£150,000

Question 33

what are the tax rates and allowance for dividends?

Answer 33

Ordinary rate - 8.75%
Upper rate - 33.75%
Additional rate - 39.35%

allowance is up to £2000

Question 34

what does PSA stand for?

Answer 34

personal savings allowance

Question 35

what is savings income?

Answer 35

savings income includes income from bank and building society interest, interest on government securities and loan interest

Question 36

what are the various types of income?

Answer 36

ns - non-savings income (employment)

s - savings income (bank interest, loan interest)

d - dividends income

Question 37

what is the savings allowance for various tax rate bands?

Answer 37

basic rate band - £1000 PSA
higher rate band - £500 PSA
additional rate band - £0 PSA

Question 38

what is the starting rate band?

Answer 38

£5,000 of your savings income is tax free for basic rate taxpayers