ICAEW Principles of Tax Exam Questions
And Answers 100% Pass
When to submit a full tax return? - answer✔- you are a Director of a company
- a sole trader with turnover > $85,000
- voluntarily
When should individuals notify HMRC of chargability? - answer✔5th October following the end of the
tax year (After the next April) - in penalties section of tax return
Submission dates for personal self-assessment tax returns - answer✔in the tax tables
How long can HMRC amend errors in a return - answer✔9 months from when it was filed
How long can a tax-payer amend their return? - answer✔12 months after the due date (i.e. 31st Jan
after tax year or 3 months after return requested).
How is a payment on accounts calculated and when are they paid? - answer✔Each payment is half of
the previous year's income tax and Class 4 NIC (excluding PAYE). Interim payment dates in tax tables.
What is an extra-statutory concession? - answer✔a relaxation of legal position to resolve anomalies and
relieve hardship - not an official source of tax law
What is exempt from income tax? - answer✔Income from; National Savings Certificates, ISAs, Winnings,
some benefits, Redundancy pay, Scholarships, interest from overpaying tax, qualifying compensation
payments
What is included in Non-Savings income? - answer✔Employment income (inc pension and benefits),
trading profits, property income)
Difference between net income and taxable income - answer✔Net income is BEFORE personal
allowance is accounted for, taxable income is AFTER
When is personal allowance reduced? - answer✔£1 personal allowance deducted for every £2 earned
over £100,000 - so reduced to nil at £125,000
In what order is income tax liability calculated? - answer✔Personal allowance, non-savings, savings,
dividends
What is the savings starting rate band? - answer✔0% tax on any savings income in the first £5000 of
total income
What is the savings income nil rate band? - answer✔A proportion of the savings income at 0%,
dependent on income level. £1000/£500/£0 = basic rate/higher rate/additional rate, respectively.
What is the dividend nil rate band? - answer✔First £2000 of dividend income is at 0%, regardless of
taxpayer rate. Then special %s for bands of income, in tax tables.
Order to do an income tax computation - answer✔1. Take off personal allowance if not already
2. Account for non-savings income rate
3. Savings starting rate band
4. Savings income nil rate band
5. Any other savings income
6. Dividends income nil rate band
7. Any other dividends income
How to get tax payable/repayable from the tax liability - answer✔Remove any tax already deducted at
source (usually PAYE)
How to account for Gift Aid donations in income tax computations - answer✔1. Find the gross donation
amount by x1.25 (the amount needed to earn to give the donation after PAYE).
2. Extend all the tax bands by this gross amount
When are people eligible for the marriage allowance - answer✔- Both parties must be a basic rate
taxpayer after personal allowance
- must be spouses or civil partners
How does the marriage allowance work? - answer✔the giver loses 10% of their allowance (£1250), and
the receiver's tax liability is reduced by 20% of that (£250). it's beneficial if one partner doesn't use their
whole personal allowance.
What basis is employment income taxed on? - answer✔Receipts basis - so uses when payments were
made, or the person becomes legally entitled to it. e.g. when bonuses are paid rather than declared.
When is accommodation an exempt (non-taxable) benefit? - answer✔When it's necessary for proper
performance of duties, produces better performance, or if there is a threat to employees security
How to calculate the benefit value of accommodation? - answer✔the annual value (or rent paid by
employer) + (Cost - £75,000) x rate of interest at start of tax year
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