CTA Part 2 flashcards

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

Personal allowance taper threshold

The personal allowance of £12,570 is reduced by £1 for every £2 of adjusted net income above £100,000, reaching nil at £125,140 in 2024/25.

Class 1 primary NIC rate

For 2024/25 employees pay 8% on earnings between the £242 weekly primary threshold and £967 upper earnings limit, then 2% on earnings above that limit.

Dividend allowance 2024/25

The first £500 of dividend income is taxed at 0%; dividends above it are taxed at 8.75%, 33.75% or 39.35% depending on the taxpayer's band.

Pension annual allowance

The standard annual allowance is £60,000; it tapers by £1 for every £2 of adjusted income above £260,000, down to a minimum of £10,000.

Termination payment exemption

The first £30,000 of a termination payment is exempt from income tax and NIC; the excess is taxable, with post-employment notice pay taxed as earnings.

Corporation tax main rate

For financial years from 1 April 2023, companies with augmented profits above £250,000 pay corporation tax at 25% on taxable total profits.

Marginal relief fraction

Companies with augmented profits between £50,000 and £250,000 get marginal relief at 3/200 of the difference, giving an effective 26.5% rate.

Annual investment allowance

The AIA gives 100% relief on most plant and machinery up to £1 million per 12-month period, with the limit shared among related companies.

Section 455 loan charge

A close company making a loan to a participator must pay 33.75% tax on the loan; the tax is repayable when the loan is repaid or released.

Group relief ownership test

Group relief requires 75% common ownership of ordinary share capital and entitlement to 75% of profits and assets between surrender and claim companies.

Annual exempt amount

For 2024/25 the CGT annual exempt amount is £3,000; gains up to this level are tax-free and the amount cannot be carried forward.

Business asset disposal relief

BADR taxes qualifying business disposal gains at 10% up to a £1 million lifetime limit; the rate rises to 14% in 2025/26 and 18% in 2026/27.

Principal private residence relief

Gains on a taxpayer's only or main home are exempt; the final 9 months of ownership always qualify, plus periods of actual occupation.

Chattels £6,000 exemption

Gains on tangible movable property disposed of for £6,000 or less are exempt; above that, marginal relief limits the gain to five-thirds of the excess.

CGT residential property rates

Residential property gains are charged at 18% within the basic rate band and 24% above it, with the same rates now applying to other assets.

Negligible value claim

A claim treats an asset as disposed of and reacquired at market value when it has become of negligible value, creating an allowable loss.

Nil rate band

The inheritance tax nil rate band is £325,000 per individual and is frozen; unused band is transferable to a surviving spouse or civil partner.

Residence nil rate band

The RNRB is £175,000 for a main residence passing to direct descendants; it tapers by £1 for every £2 of estate above £2 million.

Taper relief seven years

Tax on failed PETs is reduced by 8% for each year survived after three years, giving relief of 8%, 16%, 24% and 32%.

Annual exemption IHT

Each individual can give away £3,000 of value each tax year free of IHT, with unused annual exemption carried forward one year only.

Relevant property trust charge

Discretionary trusts pay IHT at 20% on entry and up to 6% on each ten-year anniversary, based on the trust's nil rate band.

VAT registration threshold

Registration is compulsory when taxable turnover exceeds £90,000 in any 12-month period, or is expected to exceed it in the next 30 days.

VAT standard rate

The standard rate of VAT is 20%, applying to most goods and services; the reduced rate is 5% and the zero rate applies to specified supplies.

Partial exemption de minimis

Input tax is recoverable in full if exempt input tax is under £625 per month on average and below 50% of total input tax.

Option to tax

An election makes supplies of land and buildings standard-rated, allowing input tax recovery; it can be revoked after 20 years or with consent.

Construction domestic reverse charge

For specified construction services between VAT-registered businesses, the customer accounts for VAT instead of the supplier, applying to invoices from 1 March 2021.

Self assessment filing deadline

Online self assessment 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 payments on account are due on 31 January and 31 July, each 50% of the previous year's liability, where that liability exceeds £1,000.

Enquiry window

HMRC may open an enquiry into a self assessment return within 12 months of the filing date; discovery assessments depend on the behaviour.

Deliberate error penalty

Penalties for careless errors start at 30%, deliberate errors at 70% and deliberate concealed errors at 100% of the potential lost revenue.

PCRT fundamental principles

The five fundamental principles are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour; CTA members must follow PCRT when advising.

Suspicious activity report

Under the Money Laundering Regulations 2017, tax advisers must perform customer due diligence and report suspected money laundering to the National Crime Agency via a suspicious activity report.