11 - Income tax - overview and investment income.

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Overseas income assessed under the remittance basis will be subject to income tax at ... rates.
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non-saving income rates
1. Non-saving income. | 2. Saving income. | 3. dividend income. | To maximise tax relief in most cases offset PA and reliefs against income in the same order as above. | In some circumstances it is beneficial to offset the PA in different order.
I.T. Interest on qualifying loans relief is based on ... amount.
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on gross amount
Maximum deduction from total income is greater of £50.000 and 25% or ATI. The ATI formula is:
ATI - adjusted taxable income
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Total income − Gross PPCs
PPC - personal pension scheme
Marriage allowance (£1250) restriction:
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Neither of spouses cannot be a higher or additional taxpayer.
DTR formula (income tax reducer):
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lower of UK and overseas tax
Non-saving income types:
ET PPT
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Employment | Trading | Property | Pension | Trust
The income arising from assets held jointly by husband and wife is normally split 50:50, except...
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shares in close companies.
The income arising from assets held jointly by husband and wife is normally* ... An ... is available, except... and shares in close companies.
3
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split 50:50. | An election is available to split the income according to beneficial ownership. | The election cannot be made for joint bank accounts or building society accounts.
Income earned by a child from a parental disposition is taxed on the parent if exceeds...
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if the gross income exceeds £100 per annum. Note that, when the amount is greater than £100, the whole amount is taxable, not just the excess.
Income tax exempts. Interest on...
3
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NSI saving certificates. | Save as you earn (SAYE) share save accounts. | Tax repayments interest.
NST
NSI - National Savings and Investment
Income tax exempts:
#
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Statutory redundancy and £30.000 of loss of employment compensation. | Universal credit. | Child benefit. | Venture capital trust (VCT) dividends. | Educational grants and scholarship. | Interest* | Winnings and prizes.
SUCh_VIEW
*NSI saving certificates. | Save as you earn (SAYE) share save accounts. | Tax repayments interest.
I.T. ISA allowance on spouse death conditions:
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Any combination of ISA-cash and ISA-shares up to £20,000.
Property income is assessed on cash basis but accrual basis is compulsory if...
2
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if gross annual rent is over £150,000 | or can elect to use accrual basis.
Property income. Expenses reliefs:
2
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Replacement furniture relief. | Interest paid is an allowable deduction*.
*special rules for individuals apply
Property income losses treatment for individuals:
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can only be carried forward against future UK property income. | The loss is automatically carried forward and set against the first available future property income.
If a loss arises on the overseas property business it may only be carried forward against future profits from the overseas property business. | Profits and losses on all the properties are aggregated.|
Property income formula:
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Rent received + Rental income portion of short lease premiums received − Allowable expenses
Tax relief on financing costs of investment property is restricted to...
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to 20%.
Tax relief on financing costs of investment property applies to loans to...
2
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to buy | or improve residential property.
Carrying out work to the property in order to make it more marketable, or taking steps to find purchasers, will indicate a trading motive. | Relief has been phased in gradually
Investment property financing costs relief for 2020/21 rules for individuals:
2cz
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No finance costs deductible from property income. | Tax relief for all finance costs given at 20% by deduction from IT liability.
Investment property financing costs relief has not impose restrictions on:
3
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Companies. | Loans relating to the furnished holiday accommodation. | Loans relating to non-residential properties.
Property income. Premium for granting short leases formula:
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2% × Premium × (n − 1)
n = number of years of lease
Rent-a-room relief conditions:
2cz+2cz
Furnished room in a main domestic residence.
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Gross rent up to £7,500 is exempt, | unless elect for loss.
If the gross annual receipts are more than £7,500: – the individual may choose between paying tax on the excess | or being taxed in the ordinary way on the profit from letting (rent less expenses less replacement furniture relief).
Furnished holiday accommodation (FHA) tax treatment:
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property income but treated as arising from a single and separate business. | Business asset for Gift relief and BADR (as opposed to normal residential property).
Relevant earnings for pensions relief.
Furnished holiday accommodation (FHA) and finance costs:
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100% fully deductible from FHA income
Furnished holiday accommodation - all Plant and machinery (including furniture) treatment:
2
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Deduction available, if using cash basis. | Capital allowances available, if using accruals basis.
FHA and losses:
3
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Can only be set against profits from the same FHA business. | Firstly offset in the same year, then carry forward. | UK FHA losses can on be set against UK FHA profits (the same rule for EEA losses).
Furnished holiday accommodation conditions:
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Available to let for at least 210 days. | Actually let for at least 105 days. | If own more than 1 property averaging is available to satisfy the 105 day rule. | Not let for periods of ‘long term occupation’* in excess of 155 days.
*occupation by the same person for at least 31 consecutive days.
Situation condition for Furnished holiday accommodation:
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Must be situated in the UK or EEA.
Real estate investment trusts (REITs) definition and operating:
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REIT gives investors the opportunity to invest in a quoted property business set up as an investment trust. | Dividends received by an individual out of the profits of a REIT are not treated like other dividend income
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Quoted property investment trust (QPIT). | Dividend received by individual from REIT are treated as property income.| Received amount grossed up by 20% on IT return | but the tax credit will be given of this gross amount.
QP20%
Individual who receives dividends of £1,200 will include gross property income in his tax return of £1,500. The income will be taxed at 20%, 40% or 45%. Tax credit of £300 is available to reduce the actual tax payable, and can be repaid.
Company transfers quoted shares to its director, who pays £1 per share, whereas MV is £24.50. What is the amount of tax if director is additional rate taxpayer?
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It is a taxable benefit equal to the amount underpaid, so it will 45% of IT and 2% of NIC ee* for £23.50 of each share.
*Share are quoted so fall within the definition of ‘readily convertible assets’, therefore NIC class 1 is payable.

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