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The Technical Quiz: 19 June

To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions

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Question One

During 2014/15 Claudia, a higher-rate taxpayer, paid £4,000 (net amount) into a registered personal pension plan and invested £2,000 in a VCT. How will these amounts be reflected in her 2014/15 income tax computation? 

A) The £4,000 pension contribution reduces her taxable income. VCT relief is given at £2,000 x 30 per cent = £600 and this amount reduces her tax payable

B) The £4,000 pension contribution is grossed up to give £5,000 and this amount is used to increase the basic rate band from £31,865 to £36,865. VCT relief is given at £2,000 x 30 per cent = £600 and this amount reduces her tax payable

C) The £4,000 pension contribution is used to increase the basic rate band from £31,865 to £35,865. VCT relief is given by deducting £2,000 from her taxable income 

D) Both amounts are deducted from her taxable income

         

Question Two

Jane earns £200,000 a year and for five years has been paying £60,000 gross into her personal pension. Which one of the following explains the tax relief position on her contribution of £50,000 paid in 2014/15?

A) She will obtain tax relief at a rate of 45 per cent on her contribution, and there will be a 45 per cent annual allowance charge on £10,000 of the contribution

B) She will obtain 40 per cent tax relief on her contribution, and there will be a 40 per cent annual allowance charge on £10,000 of the contribution

C) She will obtain 45 per cent tax relief on her contribution, and there will be a 45 per cent annual allowance charge on the whole contribution

D) She will obtain 20 per cent tax relief on her contribution, and there will be a 40 per cent annual allowance charge on £10,000 of the contribution

Scroll down for the answers

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Questions supplied by the CPD Centre. For more help keeping up to date with your technical knowledge go to www.ifacpd.com

 

 

 

 

 

 

 

 

 

Answers: 

1) B

2) A

 

 

 

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