ACCA TX UK Syllabus B. Income Tax And Nic Liabilities - Income tax in the exam - Notes 1 / 1
Exam tips for the income tax questions!
Section A and Section B Income tax questions
For the objective questions on income tax, remember that it's an all or nothing game, you either get the 2 marks or you get 0 marks.
All of options are not random numbers but answers that you can actually think are correct if you have made a small mistake (that the examiner has already thought you will make).
To avoid this, you must be very careful to read the exact requirement!
For example, does the question ask you to compute Income Tax Liability or Payable or even Taxable Income?
Does it ask for Class 1 NIC payable by the employer or all Class 1 NIC payable (employer and employee) or all NIC payable by the employer (Class 1 and Class 1A NIC of the employer?
Does the examiner ask for the allowable expenses of the trader to be computed or the disallowable?
Always pick out the easier MCQ first and if there are a few that you find very difficult, do not waste your time on them until the end as there are marks that you can score more easily in Section C - as the examiner gives you marks for your workings, so even if your final answer is wrong there, you should be able to score some marks.
Section C Income tax question
You will see a 15 mark Income Tax question which is likely to require an Income tax Computation to be prepared including a combination of employment income with assessable benefits, property income, interest and dividend income.
It may also include the opening or closing years of an unincorporated trader as the individual moves from employment to self employment during the tax year or vice versa.
Remember to keep all of these rules in mind!
Income tax computation
| Non-savings Income | Savings Income | Dividend Income | Total | |
|---|---|---|---|---|
| £ | £ | £ | £ | |
| Trading Profit | x | x | ||
| Less Trading Loss relief – brought forward | (x) | (x) | ||
| Employment income | x | x | ||
| Property income | x | x | ||
| Dividends from UK companies | x | x | ||
| Building society interest | x | x | ||
| Bank deposit interest | x | x | ||
| TOTAL INCOME | x | x | x | x |
| Less | ||||
| Qualifying interest | (x) | (x) | ||
| Other Trading Loss reliefs | (x) | (x) | ||
| NET INCOME | x | x | x | x |
| Less: Personal Allowance | (x) | (x) | ||
| TAXABLE INCOME | x | x | x | x |
Employment income (salaries, wages) must be included gross in the computation before deduction of PAYE by the employer and these will always be stated gross in the exam question.
Dividends and interest must always be included gross in the computation.
Deductions are always made first from non savings income, savings income and then dividend income.