Tax Compliance (UK) Flashcards

For UK income tax, savings income falling in the basic rate band is taxed at:

Answer: 0% (savings nil-rate band)

The personal savings allowance provides a 0% rate on the first £1,000 of savings income for basic rate taxpayers (£500 for higher rate taxpayers). Beyond the allowance, savings income is taxed at the relevant rate.

Under UK tax law, a partnership is:

Answer: Transparent for tax purposes — each partner is taxed on their share of profits

A UK partnership is tax transparent: it is not taxed as an entity; instead each partner is assessed individually on their share of the trading profit or loss in the tax year.

The UK 'super-deduction' was a temporary capital allowance that gave a deduction of:

Answer: 130% of qualifying expenditure

The super-deduction (April 2021 – March 2023) gave companies a 130% first-year allowance on qualifying new plant and machinery, reducing the corporation tax liability significantly.

For UK income tax, dividends received by UK taxpayers within the basic rate band (above the £500 allowance) are taxed at:

Answer: 8.75%

From April 2022, the dividend tax rate for basic rate taxpayers is 8.75% (increased from 7.5%). Higher rate taxpayers pay 33.75% and additional rate taxpayers pay 39.35%.

The 'wholly and exclusively' rule for UK tax purposes applies to:

Answer: Deductibility of business expenses for income tax and corporation tax

Under ITTOIA 2005 and CTA 2009, expenses are only deductible if incurred wholly and exclusively for the purposes of the trade. Dual-purpose expenditure is generally disallowed.

Pre-trading expenditure incurred up to how many years before a trade commences can be deducted for UK income tax?

Answer: 5 years

Under ITTOIA 2005, pre-trading expenditure incurred in the seven years before trade commencement that would have been allowable as a trading deduction is treated as incurred on the first day of trading.