Individual taxation Flashcards
(246 cards)
1
Q
What type of tax is income tax
A
Direct tax
2
Q
What type of tax is capital gains tax
A
Direct tax
3
Q
What type of tax is corporation tax
A
Direct tax
4
Q
What type of tax is value added tax
A
Indirect tax
5
Q
What is money paid to a business often called
A
Income
6
Q
What is money a business pays out called
A
Expense
7
Q
Can income expenditure generally be deducted from income receipts
A
Yes
8
Q
Can capital expenditure generally be deducted from income receipts
A
No
9
Q
Are regular business profits classified as income receipts
A
Yes
10
Q
Is interest from savings an income receipt
A
Yes
11
Q
Is rent received by a landlord an income receipt
A
Yes
12
Q
Is a gain on sale of business premises usually a capital receipt
A
Yes
13
Q
Is money spent on day-to-day trading income expenditure
A
Yes
14
Q
Are heating and lighting bills income expenses
A
Yes
15
Q
Are staff wages income expenses
A
Yes
16
Q
Are general repairs income expenses
A
Yes
17
Q
Is interest payable on loans income expenditure
A
Yes
18
Q
Is money to purchase a capital asset capital expenditure
A
Yes
19
Q
Is expenditure on large equipment capital expenditure
A
Yes
20
Q
Is expenditure on property capital expenditure
A
Yes
21
Q
Is enhancing a capital asset capital expenditure
A
Yes
22
Q
What do income receipts less income expenditure equal
A
Trading profits
23
Q
Can income expenses reduce the overall tax bill
A
Yes
24
Q
Can the initial cost of a shop be set off against income receipts
A
No
25
Can the cost of a van be set off against income receipts
No
26
Can the original cost of an asset reduce capital gains on disposal
Yes
27
Can a proportion of some capital expenditure be set off against income receipts
Yes
28
What is the tax equivalent of depreciation
Capital allowances
29
Do capital allowances spread the cost of capital expenditure over time
Yes
30
Are capital allowances usually deducted from income receipts
Yes
31
Is there a separate administration system for each tax
Yes
32
Is the tax year for individuals the same as the calendar year
No
33
Is the financial year for companies the same as the calendar year
No
34
Who collects UK taxes
HMRC
35
Do companies pay corporation tax on income profits
Yes
36
Do companies pay corporation tax on chargeable gains
Yes
37
What period does the individual tax year run from
April 6 to April 5
38
What period does the company financial year run from
April 1 to March 31
39
Is income tax sometimes deducted at source
Yes
40
What system involves the payer deducting tax
PAYE
41
Does the recipient of a net sum receive money after tax
Yes
42
Is the gross amount or net amount included in tax calculations
Gross amount
43
Is annual exemption a CGT allowance for individuals
Yes
44
Are capital allowances deductions for capital expenditure
Yes
45
Is CGT paid by individuals on taxable chargeable gains
Yes
46
Is corporation tax paid by companies on taxable total profit
Yes
47
Is income tax charged on the current year basis
Yes
48
Is deduction of tax at source when the payer deducts tax
Yes
49
Is PAYE a system where employers deduct income tax
Yes
50
Is personal allowance a band of tax-free income for individuals
Yes
51
Is VAT collected by registered businesses
Yes
52
Is distinguishing between income and capital important for tax treatment
Yes
53
Do capital allowances reduce the taxpayer's tax bill
Yes
54
Are individuals assessed to tax by the tax year
Yes
55
Are companies assessed to tax by the financial year
Yes
56
Does deduction at source require the payer to account for tax to HMRC
Yes
57
What are the two main methods HMRC uses to assess income tax
Self-Assessment Deduction at source
58
Are all individuals required to complete a self-assessment tax return
No
59
Are employed individuals with uncomplicated tax usually required to complete self-assessment
No
60
Is PAYE an example of deduction at source
Yes
61
What is the first step in calculating individual income tax liability
Calculate Total Income
62
What is deducted from Total Income to get Net Income
Available tax reliefs
63
What are examples of available tax reliefs
Interest on qualifying loans Pension contributions
64
What is deducted from Net Income to get Taxable Income
Personal Allowance
65
How is Personal Allowance reduced for high earners
£1 for every £2 of net income above £100000
66
After calculating Taxable Income how is it split
Non-Savings Savings Dividend Income
67
What is the order in which Taxable Income is taxed
Non-Savings Savings Dividend
68
What may be available depending on the income tax band
Personal Savings Allowance
69
What is the final step in calculating income tax liability
Apply relevant tax rates and add together
70
What is a taxpayer's gross income from all sources called
Total Income
71
What is Total Income less available tax reliefs called
Net Income
72
What is Net Income less the personal allowance called
Taxable Income
73
Do you need to include the gross amount when income is received net of tax
Yes
74
Is savings income always received gross
Yes
75
Is dividend income always received gross
Yes
76
Do basic rate taxpayers have a personal savings allowance
Yes
77
What is the personal savings allowance for basic rate taxpayers
£1000
78
Do higher rate taxpayers have a personal savings allowance
Yes
79
What is the personal savings allowance for higher rate taxpayers
£500
80
Do additional rate taxpayers have a personal savings allowance
No
81
Are dividends paid from company profits already charged to corporation tax
Yes
82
Is there a dividend allowance for individuals
Yes
83
What is the dividend allowance for all taxpayers
£500
84
Are tax rates for dividends different to other income
Yes
85
Are benefits in kind subject to income tax
Yes
86
Is PAYE used to deduct tax from benefits in kind
No
87
Are benefits in kind included in Total Income
Yes
88
Is interest paid by an individual on a qualifying loan a tax relief
Yes
89
Is interest received by an individual on savings a tax relief
No
90
Can interest on qualifying loans be deducted from Total Income
Yes
91
Can pension scheme contributions be deducted from Total Income
Yes
92
Is tax relief usually given on the amount of pension contributions made
Yes
93
Is there a limit to the amount an individual can pay into a pension scheme with tax relief
Yes
94
Is the personal allowance for 2024/25 £12570
Yes
95
Is the personal allowance reduced if Net Income is above £100000
Yes
96
Is there any personal allowance if Net Income is £125140 or above
No
97
What is the mnemonic for the order of taxing income types
Never squash donuts
98
How is non-savings income calculated
Taxable Income less Savings Income less Dividend Income
99
What is the basic rate of income tax
0.2
100
What is the higher rate of income tax
0.4
101
What is the additional rate of income tax
0.45
102
What is the basic rate for savings income
0.2
103
What is the higher rate for savings income
0.4
104
What is the additional rate for savings income
0.45
105
What is the dividend basic rate
0.0875
106
What is the dividend higher rate
0.3375
107
What is the dividend additional rate
0.3935
108
Is savings income taxed at 0% under the personal savings allowance
Yes
109
Is the first £500 of dividend income taxed at 0%
Yes
110
Is non-savings income taxed first
Yes
111
Is savings income taxed second
Yes
112
Is dividend income taxed last
Yes
113
What happens if income crosses over tax bands
It is apportioned accordingly
114
What is the 'cake' method an analogy for
Applying different tax rates to income bands
115
Does PAYE deducted income tax need to be deducted from the total tax liability
Yes
116
What are NICs
National Insurance Contributions
117
Do NICs affect the income tax computation
No
118
Can taxpayers reduce income tax liability by gifting income-producing items to children
No
119
What legislation prevents reducing tax by gifting income-producing items to children
Settlements legislation
120
Does the income from gifted income-producing items usually remain with the giver for tax
Yes
121
Is income tax charged at different rates depending on income type
Yes
122
Does the income tax rate depend on which band the income falls into
Yes
123
Is tax deducted at source effectively already paid
Yes
124
What tax applies to profit from disposing of appreciated capital assets
Capital Gains Tax
125
What are the four conditions for CGT to be charged
Chargeable Disposal Chargeable Asset Chargeable Person Chargeable Gain
126
What period does the relevant tax year for CGT cover
April 6 to April 5
127
When is CGT payable following the tax year of disposal
January 31
128
What are the two main instances of chargeable disposal
Sale of an asset Gift of an asset
129
Is there a chargeable disposal on death
No
130
What is the term for the deemed acquisition of an estate at market value on death
Free uplift on death
131
Are all forms of property included in the definition of asset for CGT
Yes
132
What is the main type of asset excluded from CGT
Principal private residence
133
What is a motor car for private use exempt from
CGT
134
Are government securities subject to CGT
No
135
Are shares held in ISAs subject to CGT
No
136
Is UK sterling held for personal use subject to CGT
No
137
What is the starting point for calculating chargeable gain
Consideration received
138
What are the two main rates of CGT for individuals
18% 24%
139
Are disposals to charities usually on a no gain no loss basis
Yes
140
Are gains made by charities usually exempt if used for charitable purposes
Yes
141
Is CGT payable on disposals between spouses or civil partners
No
142
What value is deemed for disposals between connected persons
Market value
143
Who are considered connected persons for CGT
Relatives Spouses of relatives Companies under common control Business partners
144
Does connected persons include an individual's own spouse
No
145
What value is deemed for disposals at an undervalue between unconnected persons
Market value
146
What value is deemed received by a donor making a gift
Market value
147
What is deducted from consideration received to find the gain
Allowable Expenditure
148
What are the three main types of allowable expenditure
Disposal expenditure Initial expenditure Subsequent expenditure
149
What is an example of disposal expenditure
Agents commission
150
What is included in initial expenditure
Cost price Incidental costs of acquisition
151
What is included in subsequent expenditure
Enhancements Preserving title
152
Can capital losses be deducted from capital gains in the same tax year
Yes
153
Can unrelieved capital losses be carried forward to future tax years
Yes
154
Is there a time limit on carrying forward capital losses
No
155
Is there an annual exemption for CGT for individuals
Yes
156
What is the annual exemption for CGT in the current tax year
£3000
157
Do companies have an annual exemption for CGT
No
158
What is calculated after deductions and annual exemption
Total Taxable Chargeable Gains
159
Do companies pay CGT
No
160
What tax do companies pay on chargeable gains
Corporation tax
161
Are charities generally exempt from paying CGT
Yes
162
Do basic rate taxpayers generally pay 18% CGT
Yes
163
Do higher and additional rate taxpayers generally pay 24% CGT
Yes
164
What needs to be calculated before CGT rate can be determined for individuals
Income tax
165
What is the rate of CGT if taxable income plus gains is below the basic rate threshold
0.18
166
What is the rate of CGT if taxable income exceeds the basic rate threshold
0.24
167
What is the rate of CGT on the portion of gains within the unused basic rate band
0.18
168
What is the rate of CGT on gains exceeding the basic rate band
0.24
169
What relief reduces the rate of CGT to 10% on qualifying disposals
Business Asset Disposal Relief
170
Is Business Asset Disposal Relief applied before or after annual exemption
After
171
Is a disposal of part of a trading business a qualifying disposal for BADR
Yes
172
Is a disposal of assets in a business that used to trade a qualifying disposal for BADR
Yes
173
Is a disposal of shares in a trading company a qualifying disposal for BADR
Yes
174
What is the minimum ownership period for a business to qualify for BADR
Two years
175
What is the maximum time limit for disposing of assets after a business ceases trading for BADR
Three years
176
Must the person disposing of shares in a trading company be an officer or employee for BADR
Yes
177
What minimum percentage of ordinary voting shares must an officer/employee hold for BADR
0.05
178
What is the lifetime allowance for Business Asset Disposal Relief
£1 million
179
Is Business Asset Disposal Relief available for investment businesses
No
180
What relief gives a reduced CGT rate to investors in unlisted trading companies
Investors Relief
181
What is the reduced CGT rate under Investors Relief
0.1
182
What is the minimum holding period for shares to qualify for Investors Relief
Three years
183
Must the shares under Investors Relief be fully paid ordinary shares issued for cash
Yes
184
Can an officer or employee of the company claim Investors Relief
No
185
What are two main business reliefs that defer CGT liability
Rollover Relief Hold-over Relief
186
What type of relief postpones CGT liability on replacement of business assets
Rollover Relief
187
What type of assets qualify for Rollover Relief
Land Buildings Fixed plant Machinery Goodwill
188
Is the annual exemption used to reduce the gain rolled over
No
189
What type of relief allows postponement of CGT on gifts of business assets
Hold-over Relief
190
Is the market value rule applied to gifts of business assets for hold-over relief
Yes
191
Is the donee's acquisition cost reduced by the donor's deemed gain under hold-over relief
Yes
192
Can the donor use their annual exemption to reduce the gain held over
No
193
Can hold-over relief be claimed on the gift element of an undervalue sale
Yes
194
What type of tax are all transfers of value subject to unless exempt
Inheritance Tax
195
What does IHT stand for
Inheritance Tax
196
What are the three kinds of transfer that trigger IHT
Potentially exempt transfers Lifetime chargeable transfers Death
197
What is a transfer of value made by a person during their life to another individual
Potentially exempt transfer
198
What is an inter vivos transfer of value into a trust on or after 22 March 2006
Lifetime chargeable transfer
199
What is the deemed transfer of all assets owned on death
Death
200
Is the relevant value for an inter vivos transfer the reduction in the transferor's estate
Yes
201
How is property in the taxable estate valued on death
Open market value immediately before death
202
What is the nil rate band for IHT for tax year 2022-2023
£325000
203
What is the IHT death rate above the nil rate band
0.4
204
What is the IHT lifetime rate applied to LCTs
0.2
205
Is there an additional nil rate band for leaving a family home to lineal descendants
Yes
206
What is the current value of the residence nil rate band
£175000
207
Can a surviving spouse inherit unused nil rate bands
Yes
208
What is the term for the inherited unused nil rate bands
Transferable nil rate band
209
What is used to prevent reducing IHT liability by making separate dispositions
Cumulation
210
What period prior to a transfer does HMRC consider for cumulation
Seven years
211
How is the cumulative total calculated
Total chargeable value of transfers in previous 7 years
212
What is the effect of the cumulative total on the current transfer
Reduces available NRB
213
How is the available NRB calculated
£325000 less cumulative total
214
Do exemptions and reliefs work in the same way
No
215
Do exemptions use up the NRB
No
216
Do reliefs reduce the amount of IHT payable
Yes
217
Does spouse exemption apply to lifetime transfers
Yes
218
Does spouse exemption apply to the death estate
Yes
219
Does political party exemption apply to lifetime transfers
Yes
220
Does political party exemption apply to the death estate
Yes
221
Does charity exemption apply to lifetime transfers
Yes
222
Does charity exemption apply to the death estate
Yes
223
Does business property relief apply to lifetime transfers
Yes
224
Does business property relief apply to the death estate
Yes
225
What is the abbreviation for Business Property Relief
BPR
226
Is BPR an exemption or a relief
Exemption
227
Does BPR apply to lifetime transfers
Yes
228
Does BPR apply to the death estate
Yes
229
Does business property include a sole trader's business
Yes
230
Does business property include shares in an unquoted company
Yes
231
Does business property include shares in a quoted company
Yes
232
Does BPR apply to land used for business purposes by a controlled company
Yes
233
What is the minimum ownership period for business assets to qualify for BPR
Two years
234
Is BPR available if the business is mainly for holding investments
No
235
What is the rate of BPR for a business or interest in a business
1
236
What is the rate of BPR for shares in an unquoted company
1
237
What is the rate of BPR for shares in a quoted company where the transferor had control
0.5
238
What is the rate of BPR for land used for business purposes by a controlled company
0.5
239
If a lifetime transfer qualified for BPR but is reassessed after death does it still need to qualify in the transferee's hands
Yes
240
What is the first step in calculating IHT on a failed PET or LCT
Calculate cumulative total
241
Do taper relief and credit for lifetime tax paid apply when calculating IHT after death
Yes
242
What is the first step in calculating IHT on a death estate
Calculate cumulative total
243
Where does BPR fit into the IHT calculation for a death estate
Apply exemptions and reliefs
244
Is BPR an exemption for IHT purposes
Yes
245
Does BPR apply to the transfer of various categories of business property
Yes
246
Are there different rates of BPR depending on the category of business property
Yes
