1|Page
ICAEW EXAM – BUSINESS PLANNING:
TAXATION OVERVIEW FOR ICAEW EXAMS
2025/2026 ACTUAL EXAM QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) ALL ANSWERED {570 Q & A}
ALREADY GRADED A+ | BRAND NEW!
What was Julia's income tax liability based on her earnings? -
✔✔✔ Correct Answer > Julia's total income tax liability was £232,203.
What is the tax treatment of discretionary termination payments
exceeding £30,000? - ✔✔✔ Correct Answer > The excess is taxable as
the top slice of the individual's income and taxed at the
individual's highest marginal rate after savings income and
dividends.
How is the annual allowance charge calculated for excess
contributions? - ✔✔✔ Correct Answer > The annual allowance charge
is calculated at the individual's marginal rate, which was 45% for
Julia.
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What is the relationship between adjusted income and the annual
allowance reduction? - ✔✔✔ Correct Answer > If adjusted income
exceeds £260,000, the annual allowance is reduced.
What is the significance of threshold income in relation to
pension contributions? - ✔✔✔ Correct Answer > Threshold income
determines if the annual allowance is reduced; it must be greater
than £200,000.
What are the components of adjusted income for pension
contribution calculations? - ✔✔✔ Correct Answer > Adjusted income
includes net income plus employee and employer pension
contributions.
What is the calculation method for grossing up pension
contributions? - ✔✔✔ Correct Answer > Grossing up is calculated by
multiplying the net contribution by 100/80.
What is the basic amount for pension contributions that qualifies
for tax relief? - ✔✔✔ Correct Answer > The basic amount is £3,600.
What must be true for an individual to access unused annual
allowance from prior years? - ✔✔✔ Correct Answer > The individual
must have been a scheme member in the prior year.
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What is the impact of exceeding the higher rate limit on Julia's
annual allowance charge? - ✔✔✔ Correct Answer > Since Julia's
taxable income exceeded the higher rate limit, her annual
allowance charge was taxed at 45%.
What is the total of Julia's employer contributions to her pension
scheme? - ✔✔✔ Correct Answer > Julia's employer made contributions
of £130,000.
What was Julia's adjusted net income after accounting for her
pension contributions? - ✔✔✔ Correct Answer > Julia's adjusted net
income was £210,000 after subtracting her gross pension
contributions.
What options are available for accessing a pension fund upon
retirement? - ✔✔✔ Correct Answer > You can take out a cash lump
sum or provide pension income (annuity/drawdown).
What is the tax-free amount you can withdraw from a pension
fund? - ✔✔✔ Correct Answer > 25% of the fund value, up to a maximum
of £268,275.
How is the balance of a pension fund taxed when received? - ✔✔✔
Correct Answer > It is taxed as non-savings income at rates of 20%,
40%, or 45%.
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What are the three types of termination payments received by an
employee? - ✔✔✔ Correct Answer > 1. Fully exempt from income tax, 2.
Fully taxable, 3. Partly exempt.
What types of payments are fully exempt from income tax upon
termination? - ✔✔✔ Correct Answer > Payments made on death, injury,
or disability of the employee; lump sum payments under
registered pension schemes.
What types of payments are fully taxable upon termination? - ✔✔✔
Correct Answer > Payments as a reward for services (e.g., terminal
bonuses) and compensation for loss of office that was a
contractual entitlement or had a reasonable expectation of
payment.
What is the exemption limit for discretionary payments upon
termination? - ✔✔✔ Correct Answer > The first £30,000 of discretionary
payments is exempt from income tax.
How does statutory redundancy affect the £30,000 exemption for
termination payments? - ✔✔✔ Correct Answer > Statutory redundancy
reduces the £30,000 exemption.
ICAEW EXAM – BUSINESS PLANNING:
TAXATION OVERVIEW FOR ICAEW EXAMS
2025/2026 ACTUAL EXAM QUESTIONS AND
CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) ALL ANSWERED {570 Q & A}
ALREADY GRADED A+ | BRAND NEW!
What was Julia's income tax liability based on her earnings? -
✔✔✔ Correct Answer > Julia's total income tax liability was £232,203.
What is the tax treatment of discretionary termination payments
exceeding £30,000? - ✔✔✔ Correct Answer > The excess is taxable as
the top slice of the individual's income and taxed at the
individual's highest marginal rate after savings income and
dividends.
How is the annual allowance charge calculated for excess
contributions? - ✔✔✔ Correct Answer > The annual allowance charge
is calculated at the individual's marginal rate, which was 45% for
Julia.
,2|Page
What is the relationship between adjusted income and the annual
allowance reduction? - ✔✔✔ Correct Answer > If adjusted income
exceeds £260,000, the annual allowance is reduced.
What is the significance of threshold income in relation to
pension contributions? - ✔✔✔ Correct Answer > Threshold income
determines if the annual allowance is reduced; it must be greater
than £200,000.
What are the components of adjusted income for pension
contribution calculations? - ✔✔✔ Correct Answer > Adjusted income
includes net income plus employee and employer pension
contributions.
What is the calculation method for grossing up pension
contributions? - ✔✔✔ Correct Answer > Grossing up is calculated by
multiplying the net contribution by 100/80.
What is the basic amount for pension contributions that qualifies
for tax relief? - ✔✔✔ Correct Answer > The basic amount is £3,600.
What must be true for an individual to access unused annual
allowance from prior years? - ✔✔✔ Correct Answer > The individual
must have been a scheme member in the prior year.
,3|Page
What is the impact of exceeding the higher rate limit on Julia's
annual allowance charge? - ✔✔✔ Correct Answer > Since Julia's
taxable income exceeded the higher rate limit, her annual
allowance charge was taxed at 45%.
What is the total of Julia's employer contributions to her pension
scheme? - ✔✔✔ Correct Answer > Julia's employer made contributions
of £130,000.
What was Julia's adjusted net income after accounting for her
pension contributions? - ✔✔✔ Correct Answer > Julia's adjusted net
income was £210,000 after subtracting her gross pension
contributions.
What options are available for accessing a pension fund upon
retirement? - ✔✔✔ Correct Answer > You can take out a cash lump
sum or provide pension income (annuity/drawdown).
What is the tax-free amount you can withdraw from a pension
fund? - ✔✔✔ Correct Answer > 25% of the fund value, up to a maximum
of £268,275.
How is the balance of a pension fund taxed when received? - ✔✔✔
Correct Answer > It is taxed as non-savings income at rates of 20%,
40%, or 45%.
, 4|Page
What are the three types of termination payments received by an
employee? - ✔✔✔ Correct Answer > 1. Fully exempt from income tax, 2.
Fully taxable, 3. Partly exempt.
What types of payments are fully exempt from income tax upon
termination? - ✔✔✔ Correct Answer > Payments made on death, injury,
or disability of the employee; lump sum payments under
registered pension schemes.
What types of payments are fully taxable upon termination? - ✔✔✔
Correct Answer > Payments as a reward for services (e.g., terminal
bonuses) and compensation for loss of office that was a
contractual entitlement or had a reasonable expectation of
payment.
What is the exemption limit for discretionary payments upon
termination? - ✔✔✔ Correct Answer > The first £30,000 of discretionary
payments is exempt from income tax.
How does statutory redundancy affect the £30,000 exemption for
termination payments? - ✔✔✔ Correct Answer > Statutory redundancy
reduces the £30,000 exemption.
