Chapter Two - Introduction to income tax:
Earnings from employment and pensions: this includes income from full time, part time on temporary employment. It also includes any bonuses, tips, Commission, or any benefits such as company car or loans that an individual may receive. Pension income includes state pension, company, or personal pension. This income falls under the heading of non-savings income.
click to edit
Rental income: this relates to income net of allowable expenses or property allowance received in respect of an investment property or gross income over £7,500 received from a larger Anna taxpayers’ own home.
Interest income: this includes most banks, building society interest on interest on National Savings income bonds interest from individual savings accounts, saving certificates, Premium Bonds and War on stocks oh are excluded as they are exempt.
Dividend incomes: this income in respect of company shares
click to edit
Except Social Security benefits:
Child benefits, child special allowance and child tax credit
Personal independence payment
Cold weather payments
Bereavement support payment
Income related employment and support allowance
Rates relief
War widows’ pension
Working tax/pension credit
Housing benefit
click to edit
Certain interest in savings: individual saving accounts, savings certificates on price bonds. An individual column based on annual amount into an ISA on the interest from the ISA is exempt from tax. Upper subscription limit off £20,000 can be invested in An ISA. Savings certificates are issued by National Savings and investment. The first £70 off interest received from NS&I ordinary client is exempt from tax.
Maintenance payments: an individual is not liable to pay tax or maintenance payments likewise there's no tax release for the PAYE
Tax credits: working/pension tax credit child tax credit or exempt from tax
Rental income- up to £7,500 a year from a larger in a taxpayers own home
Winning's: lottery winnings on gambling windfalls are exempt from tax
Compensation: Income from composition for personal injury is exempt from tax
click to edit
ross interest paid on eligible loans: the meaning types of eligible loans are:
Loan to purchase plant machinery for employment purpose.
Loan kicking by partner to purchase plan to machinery for partnership.
Loan to purchase ordinary shares in close company as long as the taxpayer owned at least 5% of the ordinary share capital or the devotes significant time in management of the company
Loan to parties ordinary shares in an employee control company or to purchase an interest in a partnership
Loan to pay inheritance tax, if interest is paid no more than 12 months after the loan was made.
click to edit
Annual payments and patent royalties:
these payments are usually paid net of 20% tax. Examples of such payments include copyright royalties and patent royalties. Tax relief on qualifying annual payments and partner royalties is giving in one of the following ways:
If paid wholly an exclusively for business purposes they are treated as an allowable trading expense with calculated tax adjusted profits.
If not the gross payment is deducted from the tax payer total income for the year.
Gifts or property to charity: tax relief on the gift off shows made the charity is given by the deducting the following amount:
Market value of the shares/property on the date of the gift
Plus, any incidental costs incurred by the donor
Last value of any benefits received by the donor as result of the gift
Blind person allowance (BPA):
The blind personal allowance may be claimed by individuals who are registered blind. The allowance is 2,600 deducted from the individual’s taxable income.
click to edit
Married couple allowance (MPA):
A married couple allowance may be available to couples who live together and are either legally married or are in a civil partnership. It is only available if one spouse was born before the sixth off April 1935. For couples my before 5th of December 2005, the MCA is claimed by the husband. However for those who are my door entered into several partnership after 5th of December 2005, the partner with the higher income claims the MCA.
The maximum amount of the MCA is £9,415 the minimum amount is £3,640. However unlike the personal allowance , the allowance is attacks a gesture which means that it is multiplied by 10% honest adopted from the taxpayers tax liability.
A spouse or civil partner whose taxable income is less than £12,570 com transfer up to £1,260 after all news personal allowance two other spies or several partner, provide adapter was separate end of the transfer is not liable to income tax above the basic rates.
The relief is given as a tax reducer and is the doctor from the tax liability. The maximum relief available is £1,260*20%= £252
Joint income:
As a married couple or several partners have a joint bank account interest from the bank account is split on a 5050 basis. Similarity if they own a rental property jointly, the rental income is split on a 5050 basis. This split automatically applies unless the couple make a joint election TOO HMRC specifying the actual income split that should apply.