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CTA Part 1 study materials
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CTA Part 1 practice questions

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Question 1Taxation of Individuals

For the tax year 2024/25, what personal allowance is available to a UK resident individual whose income is well below £100,000 and who makes no claims or elections?

  1. £12,570 Correct answer.
  2. £11,500
  3. £12,000
  4. £10,000

Explanation

The standard personal allowance has been frozen at £12,570 since 2021/22 and remains at that level for 2024/25. It is available in full where adjusted net income does not exceed £100,000, and is then withdrawn at £1 for every £2 of income above that limit.

Question 2Taxation of Individuals

What is the dividend allowance for an individual for the tax year 2024/25?

  1. £500 Correct answer.
  2. £5,000
  3. £1,000
  4. £2,000

Explanation

The dividend allowance was reduced to £500 with effect from 2023/24 and remains at £500 for 2024/25. Dividends within the allowance are taxed at 0%, but they still use up part of the taxpayer's basic or higher rate band.

Question 3Taxation of Individuals

What is the annual exempt amount for capital gains tax for an individual for 2024/25?

  1. £12,300
  2. £6,000
  3. £3,000 Correct answer.
  4. £1,000

Explanation

The capital gains tax annual exempt amount was reduced to £6,000 for 2023/24 and to £3,000 from 2023/24 onwards, remaining £3,000 for 2024/25. Gains up to that amount are free of capital gains tax and the exemption cannot be carried forward.

Question 4Taxation of Individuals

How much may an individual give away in each tax year free of inheritance tax under the inheritance tax annual exemption?

  1. £250
  2. £3,000 Correct answer.
  3. £1,000
  4. £5,000

Explanation

Each donor has an annual exemption of £3,000 of chargeable transfers per tax year. Any unused part of the exemption may be carried forward one year only, and it is applied before any other exemption.

Question 5Taxation of Individuals

Priya has total income of £110,000 in 2024/25 and is entitled to no reliefs other than the personal allowance. What personal allowance is available to her?

  1. £7,570 Correct answer.
  2. £5,000
  3. £12,570
  4. £10,000

Explanation

The personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000. Income exceeds the limit by £10,000, so the allowance is reduced by £5,000, leaving £12,570 − £5,000 = £7,570.

Question 6Taxation of Individuals

Marco has employment income of £9,000 and savings interest of £12,000 in 2024/25 and no other income. What income tax is payable on the interest?

  1. £886
  2. £1,686
  3. £286
  4. £486 Correct answer.

Explanation

The personal allowance covers the salary and £3,570 of interest, leaving taxable interest of £8,430. Because taxable non-savings income is nil, the full £5,000 savings starting rate applies at 0%, the £1,000 personal savings allowance covers the next £1,000, and only £2,430 is taxed at 20%, giving £486.

Question 7Taxation of Individuals

A higher rate taxpayer has £1,200 of savings interest in 2024/25. How much of that interest is covered by the personal savings allowance?

  1. £1,000
  2. £600
  3. £500 Correct answer.
  4. £0

Explanation

The personal savings allowance is £500 for a higher rate taxpayer and £1,000 for a basic rate taxpayer; additional rate taxpayers receive nothing. The allowance taxes the covered interest at 0% but still uses up part of the relevant rate band.

Question 8Taxation of Individuals

A basic rate taxpayer transfers the marriage allowance to her spouse, who is also a basic rate taxpayer. What is the maximum tax reduction the couple can obtain for 2024/25?

  1. £500
  2. £252 Correct answer.
  3. £0
  4. £1,260

Explanation

The marriage allowance lets a taxpayer transfer 10% of their personal allowance, £1,260, to a spouse or civil partner. The recipient receives a tax reducer equal to 20% of the transferred amount, which is £252.

Question 9Taxation of Individuals

Ali lets a furnished room in his only home for £9,000 in 2024/25 and incurs allowable expenses of £1,000. Making the most beneficial claim, what is his taxable property income?

  1. £500
  2. £1,500 Correct answer.
  3. £8,000
  4. £9,000

Explanation

Under rent-a-room relief, qualifying receipts up to £7,500 are exempt, so Ali can instead exclude £7,500 and be taxed on £9,000 − £7,500 = £1,500. This is better than deducting the actual £1,000 of expenses, which would leave £8,000 taxable.

Question 10Taxation of Individuals

What is the amount of the trading allowance available to an individual for 2024/25?

  1. £2,000
  2. £500
  3. £1,000 Correct answer.
  4. £7,500

Explanation

The trading allowance is £1,000 of gross trading receipts per tax year. Where receipts exceed £1,000, the allowance may be deducted in full instead of actual expenses, but the taxpayer cannot deduct both.

Question 11Taxation of Individuals

Ben is a higher rate taxpayer who makes a Gift Aid donation of £800 in 2024/25. What further income tax relief can he claim through self assessment?

  1. £200 Correct answer.
  2. £400
  3. £160
  4. £320

Explanation

The £800 paid net is treated as a gross donation of £1,000, on which the charity reclaims £200 at the basic rate. Ben, as a higher rate taxpayer, can claim the difference between higher and basic rate relief, which is a further 20% of the gross donation, £200.

Question 12Taxation of Individuals

A self-employed individual has taxable trading profits of £55,000 in 2024/25 and no other income. What is the Class 4 national insurance liability?

  1. £2,262.00
  2. £2,750.00
  3. £3,300.00
  4. £2,356.60 Correct answer.

Explanation

Class 4 NIC is charged at 6% on profits between the lower profits limit of £12,570 and the upper profits limit of £50,270, and at 2% above that. That gives 6% × £37,700 = £2,262.00 plus 2% × £4,730 = £94.60, a total of £2,356.60.

Question 13Taxation of Individuals

Ravi has relevant earnings of £200,000 in 2024/25 and has already made pension contributions of £80,000. His annual allowance is £60,000. He has unused annual allowance of £25,000 from 2021/22 and £10,000 from 2022/23, and made no contributions in those years. What total annual allowance is available to him for 2024/25?

  1. £60,000
  2. £85,000
  3. £110,000
  4. £95,000 Correct answer.

Explanation

Unused annual allowance may be carried forward for up to three years, so the £25,000 from 2021/22 and £10,000 from 2022/23 are available. The total is therefore £60,000 + £25,000 + £10,000 = £95,000, and his £80,000 of contributions is within that limit so no charge arises.

Question 14Taxation of Individuals

Sara lets a flat and receives gross rent of £1,800 in 2024/25. Her allowable expenses are £600. What is her taxable property income for the year?

  1. £1,200
  2. £800 Correct answer.
  3. £0
  4. £1,800

Explanation

Where gross property income exceeds £1,000, the taxpayer may deduct the flat £1,000 property allowance in full instead of actual expenses. That gives £1,800 − £1,000 = £800, which is better than £1,800 − £600 = £1,200.

Question 15Taxation of Individuals

Which period at the end of a period of ownership always qualifies for private residence relief, regardless of how the property was used?

  1. The final 18 months
  2. The final 6 months
  3. The final 24 months
  4. The final 9 months Correct answer.

Explanation

The final nine months of ownership are always treated as a period of residence for private residence relief, provided the property has at some time been the individual's only or main residence. Certain absences, such as employment elsewhere, can extend the qualifying period beyond nine months in specific circumstances.

Question 16Taxation of Individuals

Under the statutory residence test, an individual is automatically UK resident for a tax year if present in the UK for at least how many days in that year?

  1. 270 days
  2. 183 days Correct answer.
  3. 90 days
  4. 120 days

Explanation

One of the automatic UK tests is presence in the UK for 183 days or more in the tax year, counting days where the individual is present at midnight. Automatic residence overrides the sufficient ties test entirely.

Question 17Taxation of Individuals

In 2024/25 Jo has adjusted net income of £65,000 and receives child benefit of £1,332 for one child. What is the high income child benefit charge?

  1. £333 Correct answer.
  2. £1,332
  3. £0
  4. £666

Explanation

The charge is 1% of the child benefit for each £200 by which adjusted net income exceeds £60,000. Income exceeds the threshold by £5,000, giving a 25% charge, so 25% × £1,332 = £333.

Question 18Taxation of Individuals

An individual has adjusted income of £300,000 and threshold income above £200,000 in 2024/25. What is her annual allowance for pension contributions?

  1. £40,000 Correct answer.
  2. £30,000
  3. £10,000
  4. £60,000

Explanation

Where adjusted income exceeds £260,000, the annual allowance is reduced by £1 for every £2 of excess, subject to a minimum of £10,000. The excess is £40,000, so the allowance falls by £20,000 to £40,000.

Question 19Taxation of Individuals

A gift of £300,000 was made on 1 June 2020 and the donor died on 1 December 2023. There were no other lifetime transfers and the nil rate band is fully available. What inheritance tax is payable on the gift?

  1. £120,000
  2. £96,000 Correct answer.
  3. £0
  4. £80,000

Explanation

The gift was made three years and six months before death, so it is a failed potentially exempt transfer. It falls within the nil rate band, but taper relief reduces the tax by 20% for a period of between three and four years, giving 40% × £300,000 × 80% = £96,000.

Question 20Taxation of Individuals

Ahmed receives a £50,000 termination payment on leaving employment, of which £10,000 is contractual pay in lieu of notice. What amount is subject to income tax?

  1. £50,000
  2. £20,000 Correct answer.
  3. £40,000
  4. £30,000

Explanation

Contractual pay in lieu of notice is earnings and is fully taxable, so the £10,000 is taxed in full. The remaining £40,000 is a termination payment qualifying for the £30,000 exemption, leaving £10,000 taxable; the total taxable amount is therefore £20,000.

Question 21Taxation of Individuals

An employer gives each employee a bottle of wine at Christmas costing £45. How is this treated for income tax?

  1. Exempt only for basic rate employees
  2. Taxable, as gifts are never exempt
  3. Exempt as a trivial benefit Correct answer.
  4. Taxable as a cash equivalent benefit

Explanation

A benefit is exempt as a trivial benefit where it costs the employer £50 or less, is not cash or a cash voucher, is not provided under a salary sacrifice arrangement and is not given in recognition of services performed. A £45 bottle of wine meets these conditions.

Question 22Taxation of Individuals

Kate subscribes £20,000 for new ordinary shares in an enterprise investment scheme company in 2024/25 and has sufficient income tax liability. What income tax relief is she entitled to?

  1. £6,000 Correct answer.
  2. £10,000
  3. £4,000
  4. £2,000

Explanation

Enterprise investment scheme subscriptions attract income tax relief at 30% of the amount invested, subject to an annual limit of £1 million. Relief on £20,000 is therefore £6,000, given as a tax reducer.

Question 23Taxation of Individuals

Under the statutory deemed domicile rules, a person who is not UK domiciled becomes deemed UK domiciled for inheritance tax purposes after being resident in the UK for at least:

  1. 20 out of the previous 20 tax years
  2. 7 out of the previous 10 tax years
  3. 10 out of the previous 15 tax years
  4. 15 out of the previous 20 tax years Correct answer.

Explanation

An individual is deemed domiciled in the UK for inheritance tax purposes once they have been resident in the UK for at least 15 of the 20 tax years immediately preceding the relevant year. A person also becomes deemed domiciled if domiciled in the UK within the previous three years.

Question 24Taxation of Individuals

On death, Priya's estate is valued at £500,000 and she had made a failed potentially exempt transfer of £200,000 four years earlier. No other reliefs or exemptions apply. What is the inheritance tax on the death estate?

  1. £140,000
  2. £200,000
  3. £150,000 Correct answer.
  4. £120,000

Explanation

The failed transfer uses the nil rate band first, absorbing £200,000 and leaving £125,000 available against the death estate. Tax on the estate is therefore 40% × (£500,000 − £125,000) = £150,000.

Question 25Taxation of Individuals

Nina has salary of £8,000, savings interest of £10,000 and dividends of £5,000 in 2024/25. What is her total income tax liability?

  1. £393.75 Correct answer.
  2. £1,093.75
  3. £831.25
  4. £0

Explanation

The personal allowance covers the salary and £4,570 of interest, leaving taxable interest of £5,430, all of which falls within the £5,000 savings starting rate and the £1,000 personal savings allowance, so no tax arises on it. Dividends of £5,000 are reduced by the £500 dividend allowance, and the remaining £4,500 is taxed at the basic rate of 8.75%, giving £393.75.

Question 26Taxation of Individuals

What is the personal allowance available to an individual with adjusted net income below £100,000 for the tax year 2024/25?

  1. £10,600
  2. £12,570 Correct answer.
  3. £11,310
  4. £12,500

Explanation

The standard personal allowance is £12,570 for 2024/25 and is available in full where adjusted net income does not exceed £100,000. Above that level it is reduced by £1 for every £2 of excess income and is withdrawn entirely once adjusted net income reaches £125,140.

Question 27Taxation of Individuals

What is the capital gains tax annual exempt amount for an individual for 2024/25?

  1. £3,000 Correct answer.
  2. £6,000
  3. £12,300
  4. £1,000

Explanation

The annual exempt amount was reduced from £12,300 to £6,000 for 2023/24 and cut again to £3,000 for 2024/25. Gains within the amount are free of capital gains tax, and any unused balance cannot be carried forward.

Question 28Taxation of Individuals

What is the dividend nil rate band for an individual for 2024/25?

  1. £2,000
  2. £500 Correct answer.
  3. £5,000
  4. £1,000

Explanation

Dividends falling within the nil rate band are taxed at 0%, but they still use up the basic and higher rate bands. The band was reduced to £1,000 for 2023/24 and to £500 for 2024/25.

Question 29Taxation of Individuals

What annual exemption is available to an individual for inheritance tax purposes in 2024/25?

  1. £250
  2. £3,000 Correct answer.
  3. £5,000
  4. £1,000

Explanation

Each individual may make transfers of up to £3,000 of value in a tax year free of inheritance tax. Any unused part of the exemption can be carried forward for one year only, after which it is lost.

Question 30Taxation of Individuals

What is the maximum employment allowance available to an eligible employer for 2024/25?

  1. £4,000
  2. £2,000
  3. £5,000 Correct answer.
  4. £10,000

Explanation

The employment allowance is £5,000 per tax year and is set against the employer's secondary Class 1 national insurance liability. Most employers can claim it, but it is not available to single-director companies or to domestic employers of personal, household or garden staff.

Question 31Taxation of Individuals

By what date must an individual file a self-assessment tax return online for the 2024/25 tax year?

  1. 5 April 2026
  2. 31 January 2026 Correct answer.
  3. 31 January 2025
  4. 31 October 2025

Explanation

An online return for a tax year must be filed by 31 January following the end of that year, so the 2024/25 return is due by 31 January 2026. A paper return would be due earlier, by 31 October 2025.

Question 32Taxation of Individuals

An employer lends an employee £9,500 interest-free for the whole of 2024/25 and makes no other loans to that employee. What is the income tax treatment of the loan?

  1. A benefit arises equal to the official rate of interest on £9,500
  2. A benefit arises on the excess of the loan over £5,000
  3. No taxable benefit arises Correct answer.
  4. A benefit arises equal to 5% of £9,500

Explanation

Cheap or interest-free loans are exempt if the total of all such loans to the employee does not exceed £10,000 at any time in the tax year. As the loan is £9,500 and there are no other loans, no benefit in kind arises.

Question 33Taxation of Individuals

What is the maximum amount an individual may subscribe to individual savings accounts (ISAs) in 2024/25?

  1. £15,000
  2. £40,000
  3. £20,000 Correct answer.
  4. £10,000

Explanation

The overall ISA subscription limit is £20,000 for 2024/25 and has been at that level since 2017/18. The limit can be split across cash, stocks and shares, innovative finance and lifetime ISAs, subject to the separate lifetime ISA cap.

Question 34Taxation of Individuals

Ruth has adjusted net income of £112,570 in 2024/25 and no other reliefs or allowances. What personal allowance is available to her?

  1. £12,570
  2. £6,285 Correct answer.
  3. £3,142
  4. £9,425

Explanation

The personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000. The excess is £12,570, giving a reduction of £6,285, so the allowance is £12,570 less £6,285, which is £6,285.

Question 35Taxation of Individuals

Eve has employment income of £18,000 and savings interest of £3,000 in 2024/25 and no other income. What income tax is payable on the savings interest?

  1. £200
  2. £600
  3. £0
  4. £400 Correct answer.

Explanation

Taxable non-savings income is £5,430, which exceeds £5,000, so the starting rate for savings is not available. The personal savings allowance covers £1,000 of the interest at 0%, leaving £2,000 taxable at the basic rate of 20%, giving £400.

Question 36Taxation of Individuals

Maya is employed with an annual salary of £50,000 in 2024/25 and is not contracted out. What is her total Class 1 primary national insurance contribution for the year (to the nearest penny)?

  1. £2,994.40 Correct answer.
  2. £2,400.00
  3. £1,000.00
  4. £3,744.00

Explanation

Employee Class 1 contributions are 8% on earnings between the primary threshold of £12,570 and the upper earnings limit of £50,270. The salary of £50,000 falls wholly between those limits, so the contribution is 8% of £37,430, which is £2,994.40.

Question 37Taxation of Individuals

Priya sells 1,000 shares in X plc on 15 June 2024. She buys 1,000 shares in X plc on 20 June 2024, and she also holds 2,000 shares in X plc acquired in 2015 in the share pool. Which shares are matched with the shares sold?

  1. The shares acquired on 20 June 2024 Correct answer.
  2. The shares held in the 2015 share pool
  3. A pro-rata split between the pool and the June 2024 purchase
  4. The shares acquired earliest, on a first-in first-out basis

Explanation

Disposals of shares are matched first with acquisitions on the same day, then with acquisitions in the following 30 days, and only then with the share pool. The purchase on 20 June 2024 is within 30 days of the sale, so it is matched first.

Question 38Taxation of Individuals

Zara makes a qualifying gain of £1,200,000 in 2024/25 on the disposal of shares in a trading company and claims business asset disposal relief. What amount of the gain is charged at the 10% rate?

  1. £1,200,000
  2. £200,000
  3. £500,000
  4. £1,000,000 Correct answer.

Explanation

Business asset disposal relief applies a 10% rate to qualifying gains up to a lifetime limit of £1,000,000. The remaining £200,000 of the gain is charged at the normal capital gains tax rate applicable to the individual.

Question 39Taxation of Individuals

What is the maximum amount an individual investor may subscribe for seed enterprise investment scheme (SEIS) shares in a single tax year?

  1. £100,000
  2. £200,000 Correct answer.
  3. £2,000,000
  4. £1,000,000

Explanation

The SEIS investor limit is £200,000 of subscriptions per tax year, increased from £100,000 with effect from April 2023. Subscriptions within the limit attract income tax relief at 50%.

Question 40Taxation of Individuals

For how many tax years can unused pension annual allowance be carried forward and used in a later year?

  1. Two tax years
  2. One tax year
  3. There is no time limit
  4. Three tax years Correct answer.

Explanation

Unused annual allowance may be carried forward for up to three tax years, and the earliest year's unused allowance must be used first. Carry forward is available only where the individual was a member of a registered pension scheme in the year in question.

Question 41Taxation of Individuals

A landlord lets a furnished flat and buys a new fridge for £600 in 2024/25 where no fridge was previously provided in the property. What deduction is available for the fridge?

  1. £600 as a revenue deduction
  2. £600 less the cost of the old item
  3. £60 a year under the wear and tear allowance
  4. Nil, because only replacements qualify Correct answer.

Explanation

Relief for replacement of domestic items allows a deduction for the cost of replacing an item of furniture or equipment in a furnished dwelling, net of any disposal proceeds. The initial provision of an item is capital expenditure and does not qualify for relief.

Question 42Taxation of Individuals

A UK resident individual disposes of a residential property in 2024/25 and realises a taxable gain. By when must the gain be reported to HMRC and the tax paid?

  1. By 31 January following the end of the tax year
  2. Within 60 days of completion Correct answer.
  3. Within 9 months of the end of the tax year
  4. Within 30 days of exchange of contracts

Explanation

Disposals of UK residential property by UK residents must be reported on a property return and the capital gains tax paid within 60 days of completion. The disposal is also included in the self-assessment return, with credit given for tax already paid.

Question 43Taxation of Individuals

An individual makes a chargeable lifetime transfer into a discretionary trust in 2024/25 and the nil rate band is fully available. What rate of inheritance tax is charged at the time of the transfer?

  1. 40%
  2. 0%
  3. 25%
  4. 20% Correct answer.

Explanation

The lifetime rate of inheritance tax on a chargeable lifetime transfer is half of the death rate, so 20% applies to the value in excess of the available nil rate band. If the transferor dies within seven years, additional tax may become payable.

Question 44Taxation of Individuals

What rate of income tax applies to dividend income that falls within the higher rate band for 2024/25?

  1. 8.75%
  2. 33.75% Correct answer.
  3. 39.35%
  4. 40%

Explanation

Dividend tax rates are lower than the corresponding non-savings rates: 8.75% within the basic rate band, 33.75% within the higher rate band and 39.35% within the additional rate band. The dividend nil rate band of £500 applies at 0% before those rates.

Question 45Taxation of Individuals

Marcus drives 12,000 business miles in his own car during 2024/25. What is the maximum tax-free mileage allowance his employer can pay him for those miles?

  1. £4,800
  2. £5,400
  3. £3,600
  4. £5,000 Correct answer.

Explanation

The approved mileage allowance is 45p per mile for the first 10,000 business miles and 25p per mile thereafter. That gives £4,500 on the first 10,000 miles plus £500 on the remaining 2,000 miles, a total of £5,000.

Question 46Taxation of Individuals

Sam has total income of £250,000 in 2024/25 and claims relief for a trading loss of £120,000 against total income. What is the maximum loss relief available after applying the restriction on income tax relief for trading losses?

  1. £50,000
  2. £120,000
  3. £62,500 Correct answer.
  4. £31,250

Explanation

Relief for trading losses against total income is capped at the greater of £50,000 and 25% of the claimant's adjusted total income. Here 25% of £250,000 is £62,500, which exceeds £50,000, so relief is restricted to £62,500.

Question 47Taxation of Individuals

Aisha gifts shares in her trading company to her son and claims gift relief. The shares are worth £500,000 at the date of the gift and her chargeable gain is £200,000. What is her son's base cost in the shares?

  1. £500,000
  2. £300,000 Correct answer.
  3. Nil
  4. £200,000

Explanation

Where gift relief is claimed, the donor's gain is held over and deducted from the donee's base cost. The son's base cost is therefore the market value at the date of the gift of £500,000 less the held-over gain of £200,000, giving £300,000.

Question 48Taxation of Individuals

In 2024/25 an individual has employment income of £200,000 and dividend income of £10,000, and her personal allowance is not available. What is the income tax payable on the dividend income?

  1. £4,000.00
  2. £3,375.00
  3. £3,738.25 Correct answer.
  4. £3,935.00

Explanation

The first £500 of dividends is covered by the dividend nil rate band at 0%. The remaining £9,500 falls in the additional rate band and is taxed at 39.35%, giving £3,738.25.

Question 49Taxation of Individuals

A painting bought for £2,000 is sold for £9,000 in 2024/25. What is the chargeable gain after any chattel relief?

  1. £2,500
  2. £7,000
  3. £3,000
  4. £5,000 Correct answer.

Explanation

Because the disposal proceeds exceed £6,000 but are below £15,000, marginal relief limits the gain to five-thirds of the excess of the proceeds over £6,000. Five-thirds of £3,000 is £5,000, which is lower than the unrelieved gain of £7,000, so the gain is restricted to £5,000.

Question 50Taxation of Individuals

An individual dies in 2024/25 with a net estate of £2,400,000 and leaves the family home to her daughter. What residence nil rate band is available to her estate?

  1. £350,000
  2. Nil Correct answer.
  3. £75,000
  4. £175,000

Explanation

The residence nil rate band is £175,000 but is tapered by £1 for every £2 by which the estate exceeds £2,000,000. The excess here is £400,000, giving a reduction of £200,000, which reduces the available band to nil.