ACA Tax Compliance (UK) 1 — Questions and Answers
Question 1: For UK income tax purposes, the personal allowance for 2024/25 is reduced by £1 for every £2 of adjusted net income above:
- £50,000
- £100,000 (Correct answer)
- £125,140
- £150,000
Correct answer: £100,000
The personal allowance is tapered at a rate of £1 for every £2 of adjusted net income above £100,000, resulting in a 60% effective marginal tax rate in this band and a nil allowance at £125,140.
Question 2: The UK corporation tax rate for the financial year 2023 for companies with profits over £250,000 is:
- 19%
- 20%
- 25% (Correct answer)
- 30%
Correct answer: 25%
From 1 April 2023, the main rate of UK corporation tax increased to 25% for companies with profits exceeding £250,000. Small profits rate of 19% applies below £50,000 with marginal relief in between.
Question 3: Capital gains tax (CGT) for UK higher rate taxpayers on residential property gains is charged at:
- 10%
- 18%
- 24% (Correct answer)
- 28%
Correct answer: 24%
From 30 October 2024, the CGT rate on residential property disposals for higher and additional rate taxpayers is 24% (reduced from 28%). Basic rate taxpayers pay 18%.
Question 4: Which of the following is an allowable deduction for UK corporation tax purposes?
- Entertaining UK customers
- Political donations
- Depreciation of fixed assets
- Interest on a business loan (Correct answer)
Correct answer: Interest on a business loan
Interest on loans used for business purposes is allowable for corporation tax (subject to corporate interest restriction rules). Customer entertaining, political donations, and depreciation are all disallowable.
Question 5: For UK VAT purposes, the standard rate is:
- 5%
- 15%
- 20% (Correct answer)
- 25%
Correct answer: 20%
The standard rate of VAT in the UK is 20%, applied to most goods and services. A reduced rate of 5% applies to certain supplies (e.g., domestic energy) and some supplies are zero-rated or exempt.
Question 6: The UK annual investment allowance (AIA) for capital allowances is currently:
- £100,000
- £200,000
- £500,000
- £1,000,000 (Correct answer)
Correct answer: £1,000,000
The AIA provides a 100% first-year allowance on qualifying plant and machinery purchases up to £1,000,000 per year, encouraging business investment.
ACA Tax Compliance (UK) 1
For UK income tax purposes, the personal allowance for 2024/25 is reduced by £1 for every £2 of adjusted net income above: