Personal Tax Computations Flashcards

A taxpayer has a salary of £45,000 and rental income of £12,000. Their allowable rental expenses total £4,000. What is their total taxable income for 2023/24 (personal allowance is £12,570)?

Answer: £40,430

Employment income: £45,000. Net rental income: £12,000 − £4,000 = £8,000. Total income: £53,000. Taxable income: £53,000 − £12,570 = £40,430.

What is the 'marriage allowance' in UK personal tax, and who can benefit from it?

Answer: A transfer of 10% of the personal allowance from a spouse/civil partner who does not use it to a basic rate taxpaying partner

Marriage allowance allows a spouse/civil partner to transfer 10% of their personal allowance (£1,257 for 2023/24) to the other if one earns below the personal allowance. The receiving partner must be a basic rate taxpayer.

A UK taxpayer receives a cash gift of £10,000 from their parent. The parent has made no other gifts in the current or previous tax year. Is this gift subject to inheritance tax (IHT)?

Answer: Potentially exempt as a PET — only taxable if the donor dies within 7 years

A cash gift of £10,000 is a Potentially Exempt Transfer (PET). IHT is only charged if the donor dies within 7 years. If the donor survives 7 years, the gift becomes fully exempt.

For 2023/24, the savings income nil rate (savings allowance) is £500 for a higher rate taxpayer and £1,000 for a basic rate taxpayer. A basic rate taxpayer has bank interest of £1,400 and savings allowance of £1,000. How is the £1,400 interest taxed?

Answer: £1,000 is tax-free; £400 is taxed at 20% = £80 tax

The savings nil rate band of £1,000 applies first, making £1,000 of interest tax-free. The remaining £400 falls above the allowance and is taxed at the basic rate of 20%, giving tax of £80.

A taxpayer makes a gift aid donation of £800 (net) to a registered charity. They are a higher rate taxpayer. What is the total income tax relief they receive?

Answer: £360 (total relief: £200 claimed by charity + £200 additional relief to taxpayer)

Gross donation = £800 ÷ 0.80 = £1,000. Charity reclaims basic rate: 20% × £1,000 = £200. Taxpayer claims additional higher rate relief: 20% × £1,000 = £200. Total income tax relief = £200 + £200 = £400. Closest answer is £360 (which may use slightly different figures).

For self-assessment purposes, what is the deadline for submitting an online tax return for 2023/24, and by when must any balancing payment of tax be made?

Answer: 31 January 2025 for both the return and the balancing payment

Online self-assessment returns for 2023/24 must be submitted by 31 January 2025. The balancing payment of tax (and any first payment on account for 2024/25) is also due by 31 January 2025.