Individual Taxation Exam Questions Answered Correctly Latest Update 2024 (Graded A+)
What is an income receipt vs capital receipt? - Answers - Income receipt: money received on a regular
basis (salary/interest/rent)
- Capital receipt: one-off, not part of regular activity
What is income expenditure vs capital expenditure? - Answers - Income expenditure: money spent on
regular basis (bills/repairs/interest on loans)
- Capital expenditure: one-off purchase or enhancement of asset (other than routine maintenance)
What is the tax year for individuals? - Answers 6 April in one year to 5 April the next
What is the financial year for companies? - Answers 1 April in one year to 31 March the next
What is the personal savings allowance? - Answers Applies to interest received by individuals on savings
- Basic rate taxpayers: first £1,000 at 0%
- Higher rate taxpayers: first £5,00 at 0%
- Additional rate taxpayers do not get one
What is the dividend allowance? - Answers No individual pays any tax on the first £500 of dividend they
receive - same for all taxpayers
What are benefits in kind? - Answers - Benefits which employees receive in addition to their salary
- Subject to income tax but not deduction under PAYE
- Employer must report amount of benefit to HMRC and the employee
- Included in total income
What is total income? - Answers A taxpayer's gross income from all sources before any deductions
What is taxable income? - Answers Net Income less the personal allowance
What is net income? - Answers Total Income less available tax relief
What tax reliefs can be deducted from total income to establish net income? - Answers - Interest paid to
bank on qualifying loans:
o Loans to buy an interest in a partnership
o Loans to contribute capital or make a loan to a partnership
o Loans to buy shares in (or make a loan to) a 'close' company
, o Loans to buy shares in an employee-controlled company or invest in a co-operative
- Pension scheme contributions
- Certain charitable donations
What is the personal allowance for the tax year 24/25 and in what circumstances is it reduced? -
Answers - £12,570
- Reduced by £1 for every £2 of Net Income above £100,000
- Individuals with Net Income of £125,140 and above will lose the benefit
What is the taxable income of a basic rate taxpayer? - Answers 0 - 37,700
What is the taxable income of a higher rate taxpayer? - Answers 37,701 - 125,140
What is the taxable income of an additional rate taxpayer? - Answers 125,140 and upwards
What are the tax rates for non-savings income AND savings income? - Answers Basic: 20%
Higher: 40%
Additional: 45%
What are the tax rates for dividend income? - Answers Basic: 8.75%
Higher: 33.75%
Additional: 39.35%
What is the formula for calculating income tax? - Answers 1. Total Income
(Less available reliefs - interest/pension)
2. Net Income
(Less personal allowance)
3. Taxable income
4. Split income: non-savings, savings, dividends
5. Apply savings/dividends allowances and tax rates
Which types of asset are specifically excluded from chargeable assets? - Answers - Principal private
residence - one per married couple. Must be occupied as only/main residence during whole period of
ownership, bar the last 9 months
- Motor cars for private use
What is an income receipt vs capital receipt? - Answers - Income receipt: money received on a regular
basis (salary/interest/rent)
- Capital receipt: one-off, not part of regular activity
What is income expenditure vs capital expenditure? - Answers - Income expenditure: money spent on
regular basis (bills/repairs/interest on loans)
- Capital expenditure: one-off purchase or enhancement of asset (other than routine maintenance)
What is the tax year for individuals? - Answers 6 April in one year to 5 April the next
What is the financial year for companies? - Answers 1 April in one year to 31 March the next
What is the personal savings allowance? - Answers Applies to interest received by individuals on savings
- Basic rate taxpayers: first £1,000 at 0%
- Higher rate taxpayers: first £5,00 at 0%
- Additional rate taxpayers do not get one
What is the dividend allowance? - Answers No individual pays any tax on the first £500 of dividend they
receive - same for all taxpayers
What are benefits in kind? - Answers - Benefits which employees receive in addition to their salary
- Subject to income tax but not deduction under PAYE
- Employer must report amount of benefit to HMRC and the employee
- Included in total income
What is total income? - Answers A taxpayer's gross income from all sources before any deductions
What is taxable income? - Answers Net Income less the personal allowance
What is net income? - Answers Total Income less available tax relief
What tax reliefs can be deducted from total income to establish net income? - Answers - Interest paid to
bank on qualifying loans:
o Loans to buy an interest in a partnership
o Loans to contribute capital or make a loan to a partnership
o Loans to buy shares in (or make a loan to) a 'close' company
, o Loans to buy shares in an employee-controlled company or invest in a co-operative
- Pension scheme contributions
- Certain charitable donations
What is the personal allowance for the tax year 24/25 and in what circumstances is it reduced? -
Answers - £12,570
- Reduced by £1 for every £2 of Net Income above £100,000
- Individuals with Net Income of £125,140 and above will lose the benefit
What is the taxable income of a basic rate taxpayer? - Answers 0 - 37,700
What is the taxable income of a higher rate taxpayer? - Answers 37,701 - 125,140
What is the taxable income of an additional rate taxpayer? - Answers 125,140 and upwards
What are the tax rates for non-savings income AND savings income? - Answers Basic: 20%
Higher: 40%
Additional: 45%
What are the tax rates for dividend income? - Answers Basic: 8.75%
Higher: 33.75%
Additional: 39.35%
What is the formula for calculating income tax? - Answers 1. Total Income
(Less available reliefs - interest/pension)
2. Net Income
(Less personal allowance)
3. Taxable income
4. Split income: non-savings, savings, dividends
5. Apply savings/dividends allowances and tax rates
Which types of asset are specifically excluded from chargeable assets? - Answers - Principal private
residence - one per married couple. Must be occupied as only/main residence during whole period of
ownership, bar the last 9 months
- Motor cars for private use
