TOPIC 3

Question 1

What are 2 taxes mainly affected by residency?

Answer 1

1. Income tax

2. Capital gains tax

Question 2

How many days of residency in the uk is classed to be a resdient for the tax year?

Answer 2

183 days

Question 3

A person who is resident and domiciled in the UK is subject to tax on what income? Whether or not that income is brought into the UK.

Answer 3

World wide earned and unearned income.

Question 4

What is the purpose of reciprocal tax treaties?

Answer 4

Contain agreements to exchange information in order to combat tax evasion

Question 5

Tax payable on the gain made when certain assets are sold is known as what?

Answer 5

Capital gains tax

Question 6

Give 6 examples of earned income:

Answer 6

1. Profits
2. Salary
3. Tips
4. Comission
5. Bonuses
6. Pension benefits

Question 7

Give 4 examples of unearned income:

Answer 7

1. Interest from investements
2. Dividends from investments
3. Rental income
4. Trust income

Question 8

What is meant by domicile?

Answer 8

The country that an individual treats as their home even if they were to live for a time in another country

Question 9

Which tax liability does domicile affect?

Answer 9

Inheritance tax

Question 10

What is taxable income?

Answer 10

Tax based on income received in a tax year

Question 11

Give 3 example of income assessable to tax:

Answer 11

1. Salary/wages
2. Pensions & retirement annuities
3. Profits from trade or proffession
4. Inventors income from copy right/patent
5. Dividends from company

Question 12

Give 3 examples of income not assessable to tax:

Answer 12

1. Redundancy payments
2. First £3600 of shares given to an employee as part of a share incentive plan
3. Interest on NS&I savings
4. Gift aid payments
5. Gambling & lottery prizes

Question 13

What amount is the personal allowance of 2020/21?

Answer 13

£12,500

Question 14

How is PA reduced for amounts over £100,000?

Answer 14

The allowance is reduced by £1 for evey £2 over the £100,000 limit

Question 15

Spouses and civil partners transferring up to 10% of their basic PA when one of them is not liable for tax and the other is not a higher or additional tax payer is known as what?

Answer 15

Marriage allowance

Question 16

A couples tax bill being redcued between £351 and £907.50 if one partner was born before 6 April 1935 is known as what?

Answer 16

Married couples allowance

Question 17

Whats the limit for the starting rate savings band?

Answer 17

£5000

Question 18

Whats the basic rate for income tax?

Answer 18

20% of income up to £37,500

Question 19

What is the higher rate income tax?

Answer 19

40% of income between £37,501 and £150,000

Question 20

Whats the additional rate of income tax?

Answer 20

45% of income earned over £150,001

Question 21

Whats the income limit for personal allowance before any reductions are made?

Answer 21

£100,000

Question 22

Whats the limit for no inheritance tax?

Answer 22

The first £325,000

Question 23

What is the tax amount for inheritance tax after the nil rate?

Answer 23

40%

Question 24

What is the amount for blind persons allowance?

Answer 24

£2,500

Question 25

What is the personal savings allowance (PSA) for a basic rate taxpayer?

Answer 25

£1000

Question 26

What is the PSA for a higher rate taxpayer?

Answer 26

£500

Question 27

What is the allowance for trading and property income?

Answer 27

The first £1000

Question 28

List the order or how tax is calculated: - dividends tax - non savings income - savings income - non qualifying life assurance policies

Answer 28

1. Non savings income 2. Savings income 3. Dividends 4. Non qualifying life assurance policy

Question 29

What system do employees use to pay tax?

Answer 29

PAYE - Pay As You Earn

Question 30

What is a P60?

Answer 30

Issued to each employee to show the total tax deducted for the previous tax year, national insurance contributions and the final tax code.

Question 31

What is a P45?

Answer 31

On leaving an employer, a P45 is provided to last entries of an employees tax. This will also help the new employor compelte a new tax deductions working sheet.

Question 32

Saira’s income = £27,430 Less personal allowance = £12,500 Taxable income £14,930 What is her final tax amount? A) £14,930 x 20% = £2,986 B) £14,930 x 0% = £0 C) £14,930 x 10% = £1,493

Answer 32

A) £14,930 x 20% = £2,986

Question 33

Michael’s self employed gross profit is £240,000. Less allowable deductions = -£40,000 Net profit = £200,000 What is michaels taxable income? A) £200,000 - £12,500 = £187,500 B) £200,000 - £0 = £200,000 C) £200,000 - £100,000 = £100,000

Answer 33

B) £2000 as his PA of £12,500 is reduced by £1 for every £2 he earns over £100,000.

Question 34

How is tax calculated for a £200,000 taxable income? £37,500 x 20% = £7000 ``` A) £112,500 x 40% = £45,000 £50,000 x 45% = £22,000 B) £62,000 x 40% = £24,800 £100,000 x 45% = £45,000 C) 200,000 x 45% = 90,000 ```

Answer 34

A) 112,500 at 40% as the higher rate tax band is up to £150,000. (£37,500 + £112,500 = £150,000) Anything above £150,000 is taxed at the additional rate of 45%

Question 35

Calculate the starting rate band: Income = £13,500 Which means their starting rate band would be: A) £5000 B) £1000 C) £4000

Answer 35

C) £4000 as £13,500 - PA £12,500 = £1000. | Starting rate band of £5000 - £1000 = £4000.

Question 36

What is the PSA for basic, higher and additional taxpayers?

Answer 36

``` Basic = £1000 Higher = £500 Additional = £0 ```

Question 37

Everyone with the same amount of savings income would be charged the same amount of savings income tax. True or false?

Answer 37

False. The tax due on savings income is calculated with your annual income. The higher your income, the more tax you’ll pay.

Question 38

``` Jamies earned income = £12,650 Taxable earned income = £150 Savings income = £2,500 Starting rate band = £5000 - jamie’s savings income tax is calculated to be £100. True or false? ```

Answer 38

False. Jamie is not subject to any sagubgs income tax: PA + starting rate band must be over £17,500 to be taxed. £5000 - £150 = £4850 jamies starting rate band. £12,500 + £4,850 = £17,350 which is under £17,500

Question 39

Roisin earned income = £29,500 Taxable earned income = £17,500 Savings income = £2,500 Roisin is not eligible for any PSA. True or false?

Answer 39

False. £29,500 + £2,500 = £32,000 which is under the basic rate tax band of £37,500 therefore she is eligible for the £1000 PSA.

Question 40

Jodie’s earned income = £49,000 Taxable earned income = £36,500 Savings income = £2,500 Total income = £51,500 This means jodie will pay 20% of £1000 as basic rate (under £37,500) And £1,500 at 40% the higher rate. True or false?

Answer 40

False. Jodies total income of £51,500 makes her a hughe rate tax payer. She will get £500 tax free and pay: £500 at 0% £500 at 20% £1,500 at 40%

Question 41

What class of NIC is: - paid by employees at 12% of earning between certain levels and upper earnings limit with a reduced level of 2% payable on earnings above the upper limit. - paid by employers at 13.8% at the secodnary threshold but with no upper limits.

Answer 41

Class 1

Question 42

What class of NIC is: - flat rate of contributions paid by the self employed if their annual profits exceed the small profits threshold. - are quoted as a weekly amount - collected through self assessment

Answer 42

Class 2

Question 43

What class of NIC are: - voluntey contributions that can be apid by people who would not otherwise be entitiled to the full state pensions or sick benefits. - can occur because a person has taken a career break or spent time working overseas.

Answer 43

Class 3

Question 44

What NIC class is: - additional contributions payable by self employment on annual profits between the minimum and maximum amount levels with reduced rate payable above the upper limit as for class 1. - paid to HMRC in half-yearly installments by self assessment

Answer 44

Class 4