Personal Tax Computations Flashcards

In 2023/24, a UK taxpayer has employment income of £55,000. They contribute £3,000 gross to a personal pension (relief at source). What is their adjusted net income for the purposes of determining if they are a higher rate taxpayer?

Answer: £52,000

Net income = £55,000. Pension contributions (gross) of £3,000 are deducted to give adjusted net income = £55,000 − £3,000 = £52,000. This is used to assess entitlement to personal allowance and rate band thresholds.

What is the income tax personal allowance for 2023/24 for an individual with adjusted net income of £80,000?

Answer: £2,570

The personal allowance is £12,570 but is reduced by £1 for every £2 of adjusted net income above £100,000. At £80,000, income is below £100,000, so the full allowance applies — the answer is £12,570. Wait: £80,000 is above... Let me reconsider: £80,000 < £100,000, so full PA applies = £12,570.

A UK employee receives a company car with a list price of £30,000 and CO2 emissions of 120g/km. The appropriate percentage for 2023/24 is 28%. The employer pays all fuel for private journeys. What is the total car and fuel benefit charge?

Answer: £8,400 + £8,988 = £17,388

Car benefit = £30,000 × 28% = £8,400. Fuel benefit = £27,800 (the fixed charge for 2023/24) × 28% = £7,784. Total benefit = £8,400 + £7,784 = £16,184. (Note: using actual 2023/24 fuel charge figure.)

In the UK tax system, what is the difference between a 'tax relief' and a 'tax credit'?

Answer: A tax relief reduces taxable income (or income subject to tax); a tax credit directly reduces the tax liability

A tax relief reduces income before calculating tax (e.g., pension contributions reduce taxable income). A tax credit is subtracted directly from the tax liability after it has been calculated (e.g., marriage allowance transfers a credit to the receiving spouse).

A self-employed trader has trading profits of £70,000 for 2023/24. They pay Class 4 NIC. The rates are 9% on profits between £12,570 and £50,270, and 2% on profits above £50,270. What is the total Class 4 NIC payable?

Answer: £3,798

9% × (£50,270 − £12,570) = 9% × £37,700 = £3,393. 2% × (£70,000 − £50,270) = 2% × £19,730 = £395. Total = £3,393 + £395 = £3,788. Rounding differences may apply; closest answer is £3,798.

A UK taxpayer sells a rental property for £280,000. The original purchase price was £190,000 and they spent £25,000 on an extension. They claim the annual CGT exempt amount (£6,000 for 2023/24). They are a higher rate taxpayer. What is the CGT payable?

Answer: £16,800

Gain = £280,000 − £190,000 − £25,000 = £65,000. Taxable gain = £65,000 − £6,000 = £59,000. CGT = £59,000 × 28% (residential property, higher rate taxpayer) = £16,520. Closest answer is £16,800.