Unit 1 Tipic 4

Question 1

What is capital gains tax

Answer 1

Capital gains tax is a tax payable on any gain made when certain assets are sold or disposed of.

Question 2

What are the exempt capital tax classes

Answer 2

Personal possessions worth over a threshold amount
- Second homes or buy-to-let properties
- A main home that was rented out or used for business purposes
- Shares not held in a tax-exempt account like an ISA
- Business assets like land, buildings, trademarks etc.
The annual capital gains tax allowance is £ 6,000, if you go over allowance the rates are :

18% on residential property
- 10% on other assets

Question 3

What is “ bed and breakfasting”?

Answer 3

selling and repurchasing shares across tax years to reduce taxable gains -( no more allowed)!!

Question 4

What is private residence relief ?

Answer 4

no CGT on the sale of your main home. Can only have one “main” residence at a time.

Question 5

What is Business Asset Disposal Relief

Answer 5

lets business owners pay lower CGT rate on gains from selling certain business assets/shares. Must own 5%+ of business.

Question 6

What is roll-over-relief

Answer 6

defers CGT if sale proceeds used to buy replacement business assets. Time limits apply.

Question 7

What is hold-over-relief?

Answer 7

defers CGT on gifts of certain business assets or assets liable for inheritance tax. Gains passed to recipient.

Question 8

What is inerhitance tax

Answer 8

Inheritance tax applies to gifts or assets passed on when someone dies. You only pay if the total value exceeds the nil-rate band - currently £325,000.

Below this threshold - no IHT! Above it - IHT is charged at 40%.

Any unused allowance can pass to a spouse/civil partner to give them a larger tax-free allowance.

There’s also the residence nil-rate band - an extra tax-free allowance of £175,000 when passing on a home to children/grandchildren.

Question 9

What is PET’s?( potentially exempt transfers

Answer 9

PETs - gifts made while living. If donor survives 7 years, no IHT due. If donor dies within 7 years, IHT calculated as a % based on years between gift and death.

Question 10

What is chargeable lifetime transfers

Answer 10

CLTs - gifts to trusts/companies. Lifetime IHT due immediately if above available allowance. More due if donor dies within 7 years

Question 11

Some key IHT exemptions:

Answer 11

Gifts between spouses/civil partners
- Small gifts under £250 per year
- Charity donations
- Wedding gifts up to limits
- Regular gifts from income
- Up to £3k of other gifts per year

Question 12

What is VAT ?

Answer 12

VAT is a tax on sales of most goods and services in the UK. Financial services are exempt.

Question 13

What is Stamp duty reserve tax ?

Answer 13

Stamp Duty Reserve Tax - charged on electronic share transfers done through CREST system. Deducted automatically.

Question 14

What is stamp duty land tax ?

Answer 14

paid by house buyers. Different rates based on purchase price portions.

Question 15

What is corporation tax

Answer 15

Taxed on total profits each financial year. Payment timelines based on profit amount.
Is Paid by limited companies on profits. Also clubs, societies, associations - but not partnerships/LLPs.

Question 16

What is withholding tax ?

Answer 16

Ensures income isn’t paid abroad without being taxed. Reciprocal treaties prevent double taxation.

Refers to tax levied before income received - like PAYE.

Also tax charged overseas on foreign income of non-residents.

Question 17

Pet taxable table

Answer 17

1-3 years of gift -100% of the tax
3-4 years of gift -80% of the tax
4-5 years of the gift - 60% of the tax
5-6 years of the gift - 40% of the tax
6-7 years of the gift -20% of the tax
7 + years of the tax - no tax

Question 18

Stamp duty land tax rates 23/24

Answer 18

Up to 250k- no tax
250 001-925,000 - 5% tax
925,001- 1.5 million - 10% tax
1.5 milion + - 12% tax