Computation

Question 1

Exempt income

Answer 1

Interest on national savings certificates

Income from ISAs or (NISAs) - both interest & dividends

Betting, competition, lottery and premium bond winnings

Some social security benefits

Statutory redundancy pay

First £7,500 of gross annual rents (rent a room scheme)

Scholarships

Income tax repayment interest

Universal credit

Question 2

Circumstances in which interest payments are dedutible

Answer 2

Interest payments are deductible from income if:

• to buy plant and machinery
• to buy interest in a close company
• to buy shares in an employee controlled company
• to invest in a partnership or contribute capital or make a loan
• To buy shares or lend money to a co-operative - the borrower must work for a greater part of his time in teh co-operative
• to pay inheritance tax (interest paid by personal representatives qualifies for 12 months)

Question 3

What is a close company?

Answer 3

a company controlled by its shareholder-directors or by five or fewer shareholders