AAT L4 Business & Personal Tax flashcards

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

Annual Investment Allowance

100% tax relief on most plant and machinery purchases up to £1 million per year; excludes cars and assets acquired from connected parties.

Writing-down allowance main pool

Reducing-balance allowance of 18% per year applied to the tax written-down value of most plant and machinery in the main pool.

Special rate pool

Pool for integral features and long-life assets attracting a 6% reducing-balance writing-down allowance rather than the 18% main rate.

Trading loss carry-back

Losses may be set against total profits of the same year and the preceding 12 months, generating a repayment of tax previously paid.

Business asset disposal relief

Charges gains on qualifying business disposals at 10% instead of 20%, subject to a £1 million lifetime limit per individual.

Tax-adjusted trading profit

Accounting profit after adding back disallowable items such as depreciation and entertaining, and deducting capital allowances, to arrive at taxable profit.

Personal allowance taper

Personal allowance reduces by £1 for every £2 of adjusted net income above £100,000, reaching nil when income reaches £125,140.

Personal savings allowance

Tax-free savings income of £1,000 for basic-rate, £500 for higher-rate and nil for additional-rate taxpayers each year.

Dividend allowance

First £500 of dividend income each year is taxed at 0%; dividend rates above this are 8.75%, 33.75% and 39.35%.

Starting rate for savings

0% rate on up to £5,000 of savings income where non-savings taxable income is below the personal allowance plus £5,000.

Annual exempt amount

Capital gains tax-free allowance of £3,000 per individual per tax year; gains above this are taxed at 18% or 24% for residential property.

Marriage allowance

Transfer of £1,260 of personal allowance between spouses or civil partners, giving a tax saving of up to £252 per year.

Pension annual allowance

Maximum tax-relieved pension contribution of £60,000 per year, tapered for those with adjusted income above £260,000.

Gift aid band extension

Gross gift aid donations extend the basic-rate band and higher-rate threshold, giving higher-rate taxpayers extra relief via self assessment.

Self assessment filing deadline

Online returns must be filed by 31 January following the end of the tax year; paper returns are due by 31 October.

Payments on account

Two advance payments due 31 January and 31 July, each half of the prior year's net liability, where that liability exceeds £1,000.

Late filing penalty

£100 fixed penalty for missing the deadline, then £10 per day after three months, plus further percentage-based penalties at six and twelve months.

Late payment penalty

5% of unpaid tax charged at 30 days, six months and twelve months, with interest accruing daily on the outstanding balance.

VAT registration threshold

Compulsory registration when taxable turnover exceeds £90,000 in any rolling 12-month period; deregistration threshold is £88,000.

Making Tax Digital

Requirement for VAT-registered businesses to keep digital records and file returns using compatible software rather than manual entry.

Corporation tax return deadline

Form CT600 must be filed within 12 months of the end of the accounting period; tax is payable 9 months and 1 day after period end.

HMRC enquiry window

HMRC may open an enquiry into a return within 12 months of the filing deadline when the return was submitted on time.

Record retention period

Business and VAT records must generally be kept for six years; self assessment records for five years after the filing deadline.

Sole trader taxation

Profits are taxed on the individual through income tax and Class 2 and Class 4 NICs; the business itself is not separately taxed.

Partnership profit sharing

Profits are allocated according to the partnership agreement; where none exists, profits and losses are shared equally between partners.

Class 4 NICs

Charged at 6% on trading profits between £12,570 and £50,270, and 2% on profits above £50,270 for self-employed individuals.

Small profits rate

Corporation tax at 19% on company profits up to £50,000, with the 25% main rate applying above £250,000.

Marginal relief

Reduction applied to corporation tax for profits between £50,000 and £250,000, producing an effective rate rising from 19% to 25%.

Director remuneration mix

Salary is corporation-tax deductible and attracts NICs; dividends are not deductible but taxed at lower dividend rates for shareholders.

Associated companies threshold

The £50,000 and £250,000 corporation tax limits are divided equally among companies under common control when counting associated companies.

Loans to participators

Loans from a close company to a participator can trigger a tax charge on the company, repayable when the loan is repaid.

Dividend tax rates

Dividends above the £500 allowance are taxed at 8.75% basic, 33.75% higher and 39.35% additional rate as the top slice of income.