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The lifetime rate of IHT is 20% on any part of the transfer into a trust which is in excess of the available nil rate band (NRB). If the trustees are paying the tax, then it’s just 20% of the excess. If the donor is paying the tax (and if the question is silent you assume that the donor is going to pay), then the excess over the NRB is treated as being net of 20% tax, which is 80%. Therefore if you divide by 80 and multiply by 20 (20/80) the resulting figure is the tax. 20/80 is the same as 25%. I hope this clears it up for you.
For COMPANIES, any carry back of a trading loss can only be done after a current period claim is done to the fullest extent. The set off in both cases is against total profits before qualifying charitable donations.
For UNINCORPORATED businesses (sole traders and partners in a partnership), although they must also set off losses to the fullest extent against total/net income, it can be done in any order; i.e. current year then carry back, or carry back then current year. They could also do just the current year claim and just the carry back claim if they prefer – they are two separate claims and can be done independently of each other.
The filing date is the due date, so if the due date for an Income Tax return is 31 January 2025, then HMRC has until 31 January 2026 to open up a compliance check as long as the return was filed on time. If the return was filed late, then HMRC has a bit longer to open up a compliance check.
According to the information given, £6,700 is not the correct answer; the correct answer is £8,270 as explained above.
The residence. It doesn’t have to be the main residence, just a residence that the deceased lived in at some point.
Because the £83,000 in June 2023 is the GROSS CHARGEABLE TRANSFER which means that AEs have already been deducted and the lifetime tax calculated and added in if the donor had paid it.
So the NRB at death is £(325,000 – 83,000) = £242,000.
The IHT on the death estate is £(495,000 – 242,000) x 40% = £101,200.
If you are given the GROSS CHARGEABLE TRANSFER do not do anything else to that figure other than reduce the NRB for later transfers within 7 years.
No, it has to have been lived in by the owner at some point during the ownership period.
You haven’t done anything wrong; according to the information that you have provided, his PA would be, as you have calculated, £8,270.
Is there anything else in the question that you may have missed? Property income/savings income/dividends?
For the PA to be £6,700, his ANI would have to be £111,740, which means that his income (before the deduction of the gross gift aid) would have to be £112,540. (£12,570 – 50% x (112,540 – 800 – 100,000) = £6,700.
The question states that she owns two properties, but it does not state that either of them were her main residence (they could both be rental properties). On the assumption that neither of her properties were he main residence, then the RNRB would not apply as that is one of the conditions. I must admit that the question is a bit vague on the point though!
A1: Yes, as Class 1 NIC (primary and secondary) are calculated for an ‘earnings period’ (ie either weekly or monthly depending on how often the employee gets paid), then if Emerald has only been employed for 3 months, then you would only calculate the NIC for 3 months.
A2: Yes (as above). Although the limits for Class 4 NIC in relation to the self-employment would not be time-apportioned.
A3: As Class 1A is calculated on benefits, the benefits will already have been apportioned for the shorter period and so it not make sense to apportion them again when calculating the Class 1A NIC.
There’s no shortcut; you just have to learn them (preferably via question practice)
Items on death are transferred at ‘probate value’ which is essentially market value at the date of death.
A1: if home is your permanent place of work, then travel from home to your employer’s office is business miles and can be claimed for.
A2: if the journey to the client’s premises is essentially the same as your normal commute, then it is not classed as business miles and cannot be claimed for.
No. 3% pa means 3% for a 12 month period, so each month gets 1/12 of 3%. So if it’s in use for 5 months, it doesn’t matter how long the period is, the SBAs will be 5/12 x 3%.
Yes, if the question includes the amount of the taxable benefits, then you would include the amount of Class 1A in the total amount of Class 1 NIC due. Bear in mind that it would be a separate calculation (i.e. not added to the salary) as employees pay Class 1 Primary, and employees pay Class 1 Secondary on cash remuneration, but only employers pay Class 1A.
I agree it seems a little confusing! Income arising in an ISA is exempt from income tax. You can also take out an ISA with NS&I (National Savings and Investments) in which case it enjoys the same exemption as any other ISA. Most ‘normal’ NS&I income is taxable (with some exceptions such as income from National Savings Certificates). I hope that helps to clear things up.
£(80,000 – 12,570) = taxable income of £67,430.
The basic rate band is extended by the gross personal pension contribution, so £(37,700 + 50,000) = £87,700, which means that all of her income is taxed at basic rate, so £67,430 x 20% = £13,486.
The annual allowance charge means that the excess of total pension contributions over the annual allowance results in additional tax being levied on the individual, so if the AA charge is £10,000, as this falls within the extended basic rate band (£87,700 – £67,430 = £20,270) an additional amount of £10,000 x 20% = £2,000 is added to the tax liability of £13,486, giving a total Income Tax liability of £15,486.
Incidentally, the annual allowance in 2024/25 was £60,000. It hasn’t been £40,000 since 2022/23, so with gross personal pension contributions of £50,000 as in your example (and there will be no employer’s contributions to increase this amount as she’s self employed), the example is wrong in this respect as £50,000 < £60,000 and therefore there would be no AA charge.
Plant and machinery are always wasting assets (they tend to fall in value) and if they are moveable, they are chattels. If they are sold for less than the price originally paid for them, relief for the fall in value will have been given through the capital allowances computation, so any loss is not allowable for CGT (as this would mean that loss relief would be given twice). However, if they are sold for more than the price originally paid for them, the gain is chargeable but subject to the £6,000 rule; i.e. if both proceeds and cost are greater than £6,000, the gain is chargeable as normal, but if proceeds are more than £6,000 and cost was less than £6,000, then the 5/3 rule applies to restrict the gain.
Plant and machinery are always wasting assets (they tend to fall in value) and if they are moveable, they are chattels. If they are sold for less than the price originally paid for them, relief for the fall in value will have been given through the capital allowances computation, so any loss is not allowable for CGT (as this would mean that loss relief would be given twice). However, if they are sold for more than the price originally paid for them, the gain is chargeable but subject to the £6,000 rule; i.e. if both proceeds and cost are greater than £6,000, the gain is chargeable as normal, but if proceeds are more than £6,000 and cost was less than £6,000, then the 5/3 rule applies to restrict the gain.
Yes, that’s correct. The term ‘PET’ refers the the amount after the deduction of any exemptions. There is no lifetime tax to pay as a PET only becomes chargeable if the donor dies within 7 years.
