ACCA AS Taxation (UK) — Questions and Answers
Question 1: For income tax purposes, a UK resident individual is taxed on:
- UK income only
- Worldwide income (Correct answer)
- Only employment income
- Only investment income
Correct answer: Worldwide income
UK resident individuals are subject to UK income tax on their worldwide income, regardless of where it arises, unless specific treaty provisions apply.
Question 2: The personal allowance for income tax (standard amount) reduces 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The personal allowance is tapered by £1 for every £2 by which adjusted net income exceeds £100,000, meaning it is fully withdrawn at adjusted net income of £125,140.
Question 3: Capital gains tax (CGT) for a higher-rate taxpayer on the disposal of a residential property (above the annual exempt amount) is charged at:
- 10%
- 18%
- 24% (Correct answer)
- 28%
Correct answer: 24%
From April 2024, the CGT rate on residential property gains for higher-rate taxpayers is 24% (reduced from 28%). Basic-rate taxpayers pay 18%.
Question 4: Which of the following is deductible when calculating trading profits for income tax?
- Capital expenditure on equipment
- Depreciation charged in the accounts
- Business entertaining of customers
- Bad debt specifically written off (Correct answer)
Correct answer: Bad debt specifically written off
Bad debts specifically written off against specific debts are an allowable deduction for trading income. Depreciation and capital expenditure are replaced by capital allowances; entertaining is disallowable.
Question 5: Annual investment allowance (AIA) provides:
- A 25% reducing balance allowance on all plant and machinery
- 100% first-year relief on qualifying plant and machinery expenditure up to the AIA limit (Correct answer)
- Relief spread equally over the asset's useful life
- Relief only available to companies, not sole traders
Correct answer: 100% first-year relief on qualifying plant and machinery expenditure up to the AIA limit
AIA gives 100% tax relief in the year of purchase for qualifying plant and machinery up to the annual limit (£1 million from Jan 2019). It is available to individuals and companies.
Question 6: National Insurance Contributions (NICs) Class 1 employee contributions are paid on:
- All income including bank interest
- Employment income (earnings) above the primary threshold (Correct answer)
- Self-employment profits
- All dividend income
Correct answer: Employment income (earnings) above the primary threshold
Class 1 employee NICs are charged on employment earnings (salary, wages, bonuses) above the Primary Threshold. Investment income and self-employment income are not subject to Class 1.
ACCA AS Taxation (UK)
For income tax purposes, a UK resident individual is taxed on: