AAT TPFB flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

VAT registration threshold

A business must register for VAT once taxable turnover exceeds £90,000 in any rolling 12-month period, or when it expects to exceed £90,000 within the next 30 days (2024/25).

Standard rate of VAT

20%, charged on most goods and services in the UK unless a supply is specifically reduced-rated, zero-rated, exempt or outside the scope of VAT.

Zero-rated supply

A taxable supply charged at 0% VAT, such as most food and books. Input tax can be recovered and the value counts towards the VAT registration threshold.

Exempt supply

A supply such as insurance, finance or education on which no VAT is charged. It does not count towards the registration threshold and related input tax is normally not recoverable.

Basic tax point

The date goods are delivered or services are completed. An earlier invoice date or payment date replaces it as the actual tax point for VAT purposes.

Full VAT invoice

Must show the supplier's name, address and VAT number, a unique invoice number, the date, customer details, a description, quantity, unit price excluding VAT, VAT rate and VAT amount.

Simplified VAT invoice

Permitted for retail supplies of £250 or less including VAT. It must show the supplier's name, address and VAT number, the invoice date, a description and the VAT charged.

Reduced rate of VAT

5%, charged on a limited list of supplies including domestic fuel and power, children's car seats, and certain residential renovations and conversions.

Box 5 of VAT return

The net VAT figure: total output tax in box 3 minus input tax in box 4. A positive amount is payable to HMRC; a negative amount is repayable.

VAT return deadline

An electronic VAT return and any payment are due one month and seven days after the end of the VAT period. Paper returns are due within two months.

Cash accounting scheme

Open to businesses with VAT-exclusive turnover up to £1.35 million. Output tax is accounted for when customers pay, and input tax when suppliers are paid.

Flat rate scheme

For businesses with VAT-exclusive turnover up to £150,000. VAT is a fixed percentage of gross turnover and input tax is generally not recoverable, except on capital assets of £2,000 or more.

Limited cost trader

A flat rate scheme business that spends less than 2% of turnover, or under £1,000 a year, on goods. It must use the 16.5% flat rate.

Annual accounting scheme

A VAT scheme for businesses with turnover up to £1.35 million. One return is submitted each year, with nine interim payments on account during the year.

Box 6 and Box 7

Box 6 records total sales excluding VAT and box 7 records total purchases and expenses excluding VAT, including zero-rated and exempt values where appropriate.

Late submission points

VAT returns filed late earn one penalty point each. A £200 penalty is charged once the threshold is reached, which is four points for quarterly filers.

Personal allowance

£12,570 of income free of income tax for most employees in 2024/25. It is reduced by £1 for every £2 of income above £100,000.

UK income tax bands

For 2024/25 the basic rate is 20% on taxable income up to £37,700, the higher rate is 40% to £125,140, and the additional rate is 45% above that.

Class 1 primary NIC

Employee National Insurance at 8% on weekly earnings between £242 and £967, and 2% on earnings above £967, for the 2024/25 tax year.

Class 1 secondary NIC

Employer National Insurance at 13.8% on weekly earnings above the £175 secondary threshold (2024/25), reduced by any Employment Allowance claimed for the year.

Tax code 1257L

The standard cumulative PAYE code for 2024/25, giving a full personal allowance. The letter L indicates no other adjustments have been made to the allowance.

Statutory Sick Pay

Paid at £116.75 a week for up to 28 weeks (2024/25), after three unpaid waiting days, to employees earning at least the £123 weekly lower earnings limit.

Statutory Maternity Pay

Paid over 39 weeks: 90% of average weekly earnings for the first six weeks, then £184.03 a week or 90% of earnings if lower (2024/25).

Student loan deductions

Payroll deductions starting above the plan threshold: £24,990 for Plan 1, £27,295 for Plan 2, £31,395 for Plan 4 and £21,000 for postgraduate loans (2024/25).

Full Payment Submission

The RTI report sent to HMRC on or before every payday, showing each employee's gross pay, PAYE tax, National Insurance, statutory payments and other deductions.

Employer Payment Summary

An RTI submission due by the 19th of the following month, used to claim statutory payment recoveries and Employment Allowance or to report a nil payment.

PAYE payment deadline

Payments reach HMRC by the 22nd of the following month when made electronically, or by the 19th when paid by post.

Payroll record retention

Payroll and PAYE records must be kept for three years after the end of the tax year to which they relate.

P60 deadline

A P60 summarising the year's pay and deductions must be given to every employee still employed on 5 April by 31 May following the end of the tax year.

P45 on leaving

Issued to an employee when their employment ends, showing pay and tax to date. Parts 1A to 3 go to the next employer; part 1 is kept by the employee.

Automatic enrolment contributions

The minimum total contribution is 8% of qualifying earnings between £6,240 and £50,270, of which at least 3% must be paid by the employer.

National Minimum Wage 2024/25

Hourly minimum rates are £11.44 for workers aged 21 and over, £8.60 for ages 18 to 20, and £6.40 for ages 16 to 17 and apprentices.