ACCA TX Flashcards – Personal Tax, Income Tax and NIC

Where tax relieved contributions are paid in excess of the AA limit (including any brought forward unused allowances), then there will be an AA charge. This charge is subject to income tax at a person’s marginal rate(s).

Class 1 Employer / Secondary contributions and Class 1A contributions

Class 1 Employee / Primary contributions

Class 2 and Class 4 NIC

20% × market value of the asset when first provided for the private use of an employee

No reduction is made if the employee contributes towards the cost of fuel for private use. If an employee fully reimburses the employer for all private mileage then no assessable benefit will arise

In computing the assessable benefit for each car it is necessary to know the level of CO2 emissions, if any, whether the car is petrol or diesel powered, the electric range of a hybrid car and the list price of the car.

Where the accommodation is necessary for the proper performance of the employee’s duties (e.g. a caretaker); or 

It is for the better performance of the employee’s duties and (for that type of employment) it is customary for employers to provide living accommodation (e.g. hotel-worker); or 

Where there is a special threat to the employee’s security and he resides in the accommodation as part of special security arrangements

There is no taxable benefit if the accommodation is job-related

If a partner is a continuing partner then the normal CYB of assessment will apply. 

If a new partner joins the partnership then the opening years bases of assessment will apply for that partner using the date the partner joined the partnership as his / her start date.

If a partner leaves the partnership then the closing years bases of assessment will apply for that partner using the date the partner leaves the partnership as his / her cessation date.

According to the profit sharing agreement in force during the accounting period in which the trading profit or loss was made.

Set off the loss against the total income of the current tax year (2022/23), and or the preceding tax year (2021/22) – no partial claims allowed.

If a claim has firstly been made against the total income of a tax year and some loss still remains, then for that tax year a claim may also be made against the net gains of that tax year

Any loss not utilised in the reliefs above will be carried forward to set off against the next available future trading profits of the same trade.  

Depending on the CO2 emissions of the car used by the employee, it will be allocated to either the main pool or special rate pool and a WDA of either 18% pa or 6% pa will be available – as these allowances are per annum the annual figure will be time apportioned to 9/12 of the annual amount irrespective of the date within the period when it was purchased. 

The car purchased for the business owner will have its own separate CA calculation with a WDA computed as above based on the CO2 emissions. The claim will then be limited to the level of business use.

An annual deduction against trading income would be available in relation the premium paid, computed as the property income assessment on the lessor divided by the number of years of the lease. The rental payable in each accounting period would also be an allowable deduction against trading income.

The election is only likely to be made when one spouse is a non taxpayer and has an amount of unused PA that would otherwise be wasted and the other spouse is a basic rate taxpayer.

The election must be made within 4 years of the end of the tax year to which it should apply though if made within the tax year concerned the election will remain in force for future years until it is either withdrawn or the conditions are not met. 

An election may be made to transfer a fixed amount of £1,260 of the PA to a spouse or civil partner and is only available when both taxpayers are either just basic rate taxpayers or non taxpayers.

The relief is not given as an increase in the PA of the transferee but as a tax credit to be deducted in deriving the Tax Liability of the transferee taxpayer and is taken at the basic rate of tax 20% – for 2021/22, computed as £1,260 x 20% = £252. 

This amount can only reduce the tax liability, it cannot create a repayment.

The lettings must be of UK or European Economic Area furnished accommodation made on a commercial basis with a view to the realisation of profit. In addition the following conditions must also be satisfied: 

(a) The accommodation must be available to let for at least 210 days in the tax year. 

(b) The accommodation must actually be let for at least 105 days in the year 

(c) No one person occupies the property for more than 31 consecutive days. If one or more persons do occupy the property for more than 31 consecutive days then these periods of long letting must not exceed 155 days in the year.

There is no tax relief for the interest payments against property income. Tax relief is instead given as a tax credit / reduction taken at the 20% basic rate of tax in computing the Tax Liability of the taxpayer – hence a finance expense charge of £3,000 in the 2021/22 tax year will reduce the Tax Liability by £600 (20% x £3,000) 

The 50/50 rule applies and the net property income is split equally between the computations of the spouses. A joint election may however be made by the spouses to split the income according to the actual ownership of the property.

Only personal pension contributions are treated the same way as gift aid payments. Payments into an occupational Pension scheme are deducted in computing the amount of employment income to include in the employment income assessment on the Income Tax computation.

A gift aid payment is not included on the Income Tax computation of the taxpayer, but the gross amount of any gift aid payments made in the tax year are deducted in deriving the adjusted net income of the taxpayer and will also serve to extend the basic rate and higher rate bands of tax in the calculation of the Tax Liability of the taxpayer.

If ANI exceeds £100,000 then the PA of the taxpayer is reduced by 50% of the excess, such that when ANI exceeds £125,140 the PA is reduced to nil.

It is the Net Income of the taxpayer from the Income Tax computation reduced by the gross amount of both personal pension contributions and gift aid payments made by the taxpayer.

Income tax deducted under the PAYE system is deducted from Tax Liability to derive Tax Payable

Non Savings Income, followed by Savings Income and then Dividend Income

Interest income from National Savings & Investment certificates and from an ISA

The deductions should be made in the following order – from Non Savings income, Savings income and finally Dividend income

The Personal Allowance is deducted from Net Income to derive the figure of Taxable Income.

Allowable loan interest payments and certain loss reliefs

Actual amounts received in the tax year.

Actual amounts received in the tax year.

A cash basis – a taxpayer may choose to use the accruals basis but must use the accruals basis where property income receipts exceed £150,000.

Current Year Basis (CYB) where the adjusted trading profit of the business to be assessed in any tax year is that of the Accounting Year ended in the tax year of assessment.

Note – the bases of assessment that apply in the opening years of a new business and the closing years of an old business ceasing to trade must also be learned.

Employment Income is assessed on the basis of actual amounts received, with the received date being taken as the earlier of the date when the taxpayer became entitled to the income or the date of actual receipt.

Non Savings Income is made up of Employment Income, Trading Income, Pensions and Property Income.

Savings income is interest income and dividend income is of course dividends received from companies.

Non Savings Income, Savings Income and Dividend Income. The purpose of this analysis is to know the correct rate(s) of tax to apply to each part of the Taxable Income of the taxpayer.