Abena has made the following gross contributions to her personal pension scheme over the past three tax years:
Tax year £
2012–13 52,000
2013–14 37,000
2014–15 28,000
What is the maximum gross contribution which Abena can make to her personal pension scheme for the tax year 2015–16 without giving rise to an annual allowance charge?
A £63,000
B £40,000
C £65,000
D £55,000
Patience was born on 31 December 1954. She retired on 31 December 2014, and on that date ceased employment and self-employment. The following information is available in respect of the tax year 2014–15:
Employment
(2) During the period 6 April to 31 December 2014, Patience contributed 6% of her monthly gross salary of £3,750 into her employer’s HM Revenue and Customs’ (HMRC’s) registered occupational pension scheme. Patience’s employer contributed a further 10% on her behalf.
Required:
How will these contributions to the occupations pension scheme be treated?
Patience was born on 31 December 1954. She retired on 31 December 2014, and on that date ceased employment and self-employment. The following information is available in respect of the tax year 2014–15: Employment
Personal pension contributions
During the period 6 April to 31 December 2014, Patience contributed a total of £3,600 (net) into a personal pension scheme.
Required:
How much will the tax bands be extended by because of the contribution?
Alfred and Edward King are brothers. They are trying to calculate their balancing payments for the tax year 2013–14, and the following information is available:
Edward King
(5) During the tax year 2013–14, Edward contributed 4% of his gross director’s remuneration of £179,000 into Stately Ltd’s HM Revenue and Customs’ registered occupational pension scheme. The company contributed a further 6% on his behalf.
Required:
How will the pension contribution be treated?
You should assume that today’s date is 15 March 2014.
Tobias has recently inherited the residue of his aunt Mildred’s estate. Mildred died on 8 December 2013, and her estate consisted of the following assets:
(1) A main residence valued at £660,000. This had an outstanding interest-only mortgage of £94,300.
(2) A portfolio of ordinary shares valued at £192,600.
(3) A motor car valued at £21,900.
On 8 December 2013, Mildred owed £9,400 in respect of credit card debts, and she had also verbally promised to pay the £4,600 medical costs of a friend. The cost of Mildred’s funeral amounted to £5,800.
Under the terms of her will, Mildred made specific legacies totalling £25,000 to her friends, with the residue of her estate being inherited by Tobias. Mildred had not made any gifts during her lifetime.
Mildred’s husband had died on 19 July 2006, and 40% of his inheritance tax nil rate band of £285,000 for the tax year 2006–07 was not used.
Tobias will use some of his inheritance for the following purposes:
Personal pension contribution
Tobias will make an additional personal pension contribution for the tax year 2013–14, having already made contributions of £10,000 during this tax year. He has been self-employed since 6 April 2011, and has been a member of a personal pension scheme from the tax year 2012–13 onwards. Tobias’ trading profits and gross personal pension contributions since he commenced self-employment have been as follows:
| Tax year | Trading profit £ | Pension contribution £ |
|---|---|---|
| 2011–12 | 32,000 | 0 |
| 2012–13 | 44,000 | 26,000 |
| 2013–14 | 78,000 | 10,000 |
Gift to daughter
Tobias will make a cash gift of £100,000 to his daughter when she gets married on 29 March 2014. He has not made any previous lifetime gifts.
Individual savings accounts (ISAs)
Tobias will invest the maximum possible amounts into individual savings accounts for the tax year 2013–14. He has already invested £2,400 into a cash individual savings account during this tax year, having previously invested £3,200 into a cash individual savings account during the tax year 2012–13.
Required:
(b) Advise Tobias of the maximum amount of additional gross personal pension contribution which he is permitted to make for the tax year 2013–14, and how much of this maximum contribution will qualify for tax relief. (3 marks)
Richard Tryer was born on 22 June 1971. He is employed by Prog plc as a computer programmer, and is also self-employed as a website designer. Richard has tried to prepare his own income tax computation for the tax year 2013–14, but he has found it more difficult than expected. Although the sections which Richard has completed are correct, there are a significant number of omissions. The omissions are marked as outstanding (O/S). The partly completed income tax computation is as follows:
Richard Tryer – Income tax computation 2013–14
| Note | £ | £ | |
|---|---|---|---|
| Trading profit | 1 | O/S | |
| Employment income | |||
| Salary | 41,000 | ||
| Car benefit | 2 | O/S | |
| Fuel benefit | 2 | O/S | |
| Living accommodation | 3 | O/S | |
| O/S | |||
| Property business profit | 4 | O/S | |
| Building society interest | 1,260 | ||
| Dividends | O/S | ||
| O/S | |||
| Personal allowance | (9,440) | ||
| Taxable income | O/S | ||
| Income tax | |||
| 32,010 at 20% | 6,402 | ||
| O/S at 40% | O/S | ||
| O/S at 32·5% | O/S | ||
O/S | |||
| Income tax liability | O/S | ||
| Tax suffered at source | |||
| PAYE | 9,130 | ||
| Building society interest | O/S | ||
| Dividends | 180 | ||
| (O/S) | |||
| Income tax payable | O/S |
Note 1 – Trading profit
Richard commenced self-employment on 1 January 2013. He had a tax adjusted trading profit of £3,840 for the four-month period ended 30 April 2013, and £12,060 for the year ended 30 April 2014. These figures are before taking account of capital allowances.
The only item of plant and machinery owned by Richard is his motor car, which cost £18,000 on 1 September 2013.
The motor car has a CO2 emission rate of 142 grams per kilometre, and 70% of the mileage driven by Richard is for private journeys.
Note 2 – Car and fuel benefits
Throughout the tax year 2013–14, Prog plc provided Richard with a petrol-powered motor car which has a list price of £17,900. The motor car cost Prog plc £17,200, and it has a CO2 emission rate of 144 grams per kilometre. During the tax year 2013–14, Richard made contributions of £1,200 to Prog plc for the use of the motor car.
During the period 1 July 2013 to 5 April 2014, Prog plc also provided Richard with fuel for private journeys. The total cost of fuel during the period 1 July 2013 to 5 April 2014 was £4,200, of which 45% was for private journeys.
Richard did not make any contributions towards the cost of the fuel.
Note 3 – Living accommodation
Throughout the tax year 2013–14, Prog plc provided Richard with living accommodation. The property has been rented by Prog plc since 6 April 2013 at a cost of £1,100 per month. On 6 April 2013, the market value of the property was £122,000, and it has an annual value of £8,600.
On 6 April 2013, Prog plc purchased furniture for the property at a cost of £12,100. The company pays for the running costs relating to the property, and for the tax year 2013–14 these amounted to £3,700.
Note 4 – Property business profit
Richard owns a freehold shop which is let out unfurnished. The shop was purchased on 1 October 2013, and during October 2013 Richard spent £8,400 replacing the building’s roof. The shop was not usable until this work was carried out, and this fact was represented by a reduced purchase price. During November 2013, Richard spent £800 on advertising the property for rent.
On 1 December 2013, the property was let to a tenant, with Richard receiving a premium of £12,000 for the grant of a 30-year lease. The monthly rent is £830 payable in advance, and during the period 1 December 2013 to 5 April 2014 Richard received five rental payments.
Due to a fire, £8,600 was spent on replacing the roof of the shop during February 2014. Only £8,200 of this was paid for by Richard’s property insurance.
Richard paid insurance of £480 in respect of the property. This was paid on 1 October 2013 and is for the year ended 30 September 2014.
Other information
Richard did not make any personal pension contributions during the tax year 2013–14. He has never been a member of a pension scheme.
Required:
(c) Advise Richard Tryer why the maximum amount of tax relievable personal pension scheme contribution which he could have made for the tax year 2013–14 is £50,000, and the method by which tax relief would have been given if he had made this amount of contribution. (4 marks)
John and Rhonda Beach are a married couple. The following information is available for the tax year 2012–13:
John Beach
(1) John is aged 59 and is employed by Surf plc as a sales director. During the tax year 2012–13, he was paid gross director’s remuneration of £184,000.
(2) During the tax year 2012–13, John contributed £28,000 into Surf plc’s HM Revenue and Customs’ registered occupational pension scheme. The company contributed a further £12,000 on his behalf. Both John and Surf plc have made exactly the same contributions for the previous five tax years.
(6) During the tax year 2012–13, John made personal pension contributions up to the maximum amount of available annual allowances, including any unused amounts brought forward from previous years. These contributions were in addition to the contributions he made to Surf plc’s occupational pension scheme (see note (2)). John has not made any personal pension contributions in previous tax years.
Required:
How will these pension contributions be treated?
You should assume that today’s date is 15 February 2012.
(a) Rosie Rohan, aged 48, is the managing director of Hornburg plc. During the tax year 2011–12 Rosie was paid gross director’s remuneration of £220,000. She has made the following gross personal pension contributions:
| Tax year | Pension contribution £ |
|---|---|
| 2007–08 | 33,000 |
| 2008–09 | 41,000 |
| 2009–10 | 26,000 |
| 2010–11 | Nil |
Rosie was a member of a pension scheme for the tax year 2010–11.
Required:
Advise Rosie Rohan of the total amount of pension scheme annual allowances that she has available for the tax year 2011–12, the method by which tax relief will be given for any personal pension contributions that she makes during that year, and the tax implications if she makes contributions in excess of the available annual allowances.
Note:
1. You are not expected to calculate Rosie Rohan’s income tax liability.
2. You are not expected to consider the situation where pension contributions do not attract tax relief. (6 marks)