Income tax

Question 1

Exempt income

Answer 1

National Savings Certificate
ISA’s
Betting
Rent a room scheme first £7.5k
Scholarships
Universal credit

Question 2

Gift aid

Answer 2

Extend the basic rate band by 1.25 x donation

Question 3

Gifts of assets to charity

Answer 3

Deduct value from total income if the whole of a shareholder’s interest in qualifying shares is given / sold at undervalue to a charity

Question 4

Payroll giving scheme

Answer 4

Donation deducted directly from the employee’s income before income tax is calculated
Provides tax relief at the employee’s highest tax rate

Question 5

Marriage allowance

Answer 5

Reduces tax liability by £252

Question 6

Child benefit tax charge

Answer 6

Total child benefit x 1% for every £200 of income earnt by the partner with the higher income over £60k
Charge added in arriving at income tax liability

Question 7

Interest payments made on loans taken out for the following purposes are deductible from total income

Answer 7

Buy P&M for a partnership / employment purposes
Buy an interest in a close / employee controlled company
Invest in / lend to a partnership / cooperative
Pay inheritance tax

Question 8

When is the property allowance used?

Answer 8

When allowable expenditure below both £1k and rental income

Question 9

Cash basis taxable property income pro forma

Answer 9

Used when property receipts below £150k
Rental receipts
(Property allowance or allowable expenditure paid)
Property income

Question 10

Allowable expenses

Answer 10

Legal / professional / administrative costs
Interest paid on loans to buy or improve non-residential property
Rates / taxes / services paid for by landlord
Insurance for the property
Domestic item replacement / repair / maintenance / redecoration
Fixed rate reductions for motor vehicles
Gardening and cleaning
Advertising for a new tenant
If a property is partly owner-occupied and partly let, expenses relating to periods of owner-occupation are not allowable

Question 11

Accruals basis taxable property income pro forma

Answer 11

Used when property receipts above £150k
Rent receivable
(Allowable expenditure payable)
Property income / (loss)

Question 12

Property losses

Answer 12

No taxable property income if a loss arises
Loss is carried forward and set against the first available future property income

Question 13

When is rent a room relief available?

Answer 13

If an individual lets out a furnished part of their home

Question 14

Rental income under £7.5k a year

Answer 14

Income and expenses arising in relation to the letting are ignored for income tax
No property losses arise

Question 15

Rental income over £7.5k a year

Answer 15

Normal property income rules apply
Taxpayer can elect to be assessed under Rent a Room rules on rents above £7.5k
Should only be used if allowable expenses are below £7.5k

Question 16

Relief for finance costs of letting a residential property

Answer 16

Given as a tax reducer at 20% of lower of:
- Finance costs for the year + b/f
- Property income
- Adjusted total income
Cannot be used to create a refund

Question 17

Occupational schemes

Answer 17

Run by an employer
Contribution is deducted from employment income before income tax is calculated

Question 18

Personal schemes

Answer 18

Run by a pension provider
Contribution not deducted from employment income
Individual’s income tax bands are extended by 25% of contribution

Question 18

Eligibility criteria for jobholders in a qualifying pension scheme

Answer 18

Work in the UK
Not already in a suitable workplace pension scheme
Over 22 and under state pension age
Earn over £10k annually

Question 19

Minimum level of pension contributions under auto enrolment

Answer 19

8% of qualifying earnings
The employer’s contribution must be at least 3%

Question 20

Qualifying earnings thresholds

Answer 20

Between £6,240 and £50,270

Question 21

Annual pension allowance

Answer 21

£60,000
The overall limit on gross tax-relievable contributions into an individual’s pension fund per year
Can be carried forward for three tax years if unused

Question 22

Annual allowance charge

Answer 22

Applies if the total gross individual + employer contributions made exceed the available annual allowance
Taxes the excess contribution as additional income

Question 23

Drawing a pension

Answer 23

Take out a cash lump sum
Provide pension income

Question 24

Tax free amount of vested pension fund

Answer 24

25% of lower of: - Fund value - Lifetime allowance of £1,073,100

Question 25

Taxable balance of vested pension fund

Answer 25

Taxed as non-savings income at an individual's marginal rates of tax when received

Question 26

Employment income pro forma

Answer 26

Money earnings Benefits in kind (Allowable deductions) Employment income

Question 27

Employee's are taxed on their money earnings at the earlier of...

Answer 27

Date of receipt Date when they became entitled to payment

Question 28

Director's are taxed on their money earnings at the earliest of...

Answer 28

Payment date Date when they became entitled to payment Date earnings accrued in the accounts Date bonus determined if after period of account

Question 29

Allowable deductions against employment income

Answer 29

Contributions into occupational pension Expenses incurred wholly, exclusively and necessarily for purposes of employment Deficit on mileage allowance Charitable payments under payroll deduction scheme Travel costs

Question 30

Employer can pay a tax-free allowance of up to a statutory amount if an employee makes business journeys in their own vehicle

Answer 30

Taxable benefit if amount reimbursed exceeds statutory allowance Allowable deduction if statutory allowance exceeds amount reimbursed

Question 31

Taxable and exempt benefits general rules

Answer 31

Time apportion the benefit value Deduct contributions made by the employee from the taxable benefit (except for private fuel)

Question 32

Vouchers Employees of taxable on the provision of...

Answer 32

Cash vouchers Credit tokens Vouchers exchangeable for goods and services

Question 33

Job-related accommodation

Answer 33

Not a taxable benefit Necessary Improves performance / security Customary

Question 34

Non-job-related accommodation taxable benefit if the employer owns the property

Answer 34

Annual value + (Cost - £75k) x 2.25% + bills Scale for time period (employee contribution) Cost = purchase price + capital improvements made before current year Cost replaced by MV when employee first moved if property acquired over 6 years before its first use by the employee Living expenses benefit restricted to 10% of earnings and non-accomm benefits

Question 35

Non-job-related accommodation taxable benefit if the employer rents the property

Answer 35

Higher of (annual value and rent paid) - employee contributions

Question 36

Taxable benefit for cars for private use

Answer 36

(List price - capital contribution) x CO2 % - running cost contribution

Question 37

Taxable benefit for company vans

Answer 37

£3,960 £0 if zero emission Additional private fuel benefit = £757

Question 37

Taxable benefit for private fuel

Answer 37

£27,800 x CO2 % Does not reduce the taxable amount

Question 38

Taxable benefit for assets available for private use

Answer 38

20% of MV when first provided - employee contribution No taxable benefit if there is insignificant private use

Question 39

Taxable benefit if employee subsequently acquires the asset

Answer 39

The greater of: - MV at time of employee acquisition - Original MV - cumulative taxable benefit to date for the employee - price paid

Question 40

Taxable benefit for employment related cheap loans

Answer 40

Loan value x 2.25% - actual interest paid Loan value = lower of strict method and average method Strict method = calculate interest at 2.25% month by month on outstanding balance Average method = (opening loan balance + closing loan balance / 2) No taxable benefit if loan under £10k throughout the tax year

Question 41

Taxable benefit for loan write off

Answer 41

Value of loan written off becomes taxable as employment income

Question 42

Taxable benefit where benefits are provided in-house

Answer 42

Marginal cost (contribution paid by employee)