AAT L4 Personal Tax (UK Income Tax) 4 — Questions and Answers
Question 1: Capital gains tax (CGT) for basic rate taxpayers on gains from the disposal of assets other than residential property in 2024/25 is charged at:
- 10% (Correct answer)
- 18%
- 20%
- 28%
Correct answer: 10%
From 30 October 2024, the CGT rates for non-property assets are 18% (basic rate) and 24% (higher/additional rate) — replacing the previous 10%/20% rates. However, at the time of the question context, 10% basic rate was being phased from 18% to the new rate. Note: from October 2024 Budget, basic rate is 18%.
Question 2: Business Asset Disposal Relief (BADR) applies a CGT rate of 10% on qualifying gains up to a lifetime limit of:
- £500,000
- £1,000,000 (Correct answer)
- £2,000,000
- £10,000,000
Correct answer: £1,000,000
BADR (formerly Entrepreneurs' Relief) provides a 10% CGT rate on qualifying gains from disposing of all or part of a business, business assets, or shares in a qualifying trading company — subject to a £1 million lifetime limit.
Question 3: For CGT, the annual exempt amount for individuals in 2024/25 is:
- £12,300
- £6,000
- £3,000 (Correct answer)
- £1,500
Correct answer: £3,000
The CGT annual exempt amount has been progressively reduced: £12,300 (2022/23), £6,000 (2023/24), and £3,000 from 2024/25 — significantly reducing the tax-free allowance for individuals.
Question 4: For UK income tax, benefits in kind for employees are reported on:
- The employee's P60 at year end
- Form P11D submitted by the employer to HMRC by 6 July following the tax year (Correct answer)
- Form P45 when the employee leaves
- The self-assessment return only, with no employer reporting required
Correct answer: Form P11D submitted by the employer to HMRC by 6 July following the tax year
Employers must report taxable benefits in kind on forms P11D (or through payrolling benefits) and submit them to HMRC by 6 July following the end of the tax year. The employee also declares them on self-assessment.
Question 5: A sole trader's trading losses can be relieved against:
- Capital gains only
- Total income of the current year and/or previous year, or carried forward against future trading profits (Correct answer)
- Investment income only
- Only the next year's trading profits
Correct answer: Total income of the current year and/or previous year, or carried forward against future trading profits
Under ITA 2007, trading losses can be set against total income of the current year and/or the previous year; alternatively, early-year losses have special rules allowing carry-back; or losses can be carried forward against future trading profits.
Question 6: The maximum annual contribution to a pension for income tax relief purposes is limited to:
- £40,000 per year regardless of earnings
- The lower of £60,000 (annual allowance) and 100% of the individual's UK earnings for the year (Correct answer)
- £100,000 per year
- £25,000 per year for basic rate taxpayers
Correct answer: The lower of £60,000 (annual allowance) and 100% of the individual's UK earnings for the year
Tax-relievable pension contributions are capped at the lower of the annual allowance (£60,000 for 2023/24 onwards, up from £40,000) and 100% of the individual's relevant UK earnings. Contributions above the annual allowance trigger an annual allowance charge.
AAT L4 Personal Tax (UK Income Tax) 4
Capital gains tax (CGT) for basic rate taxpayers on gains from the disposal of assets other than residential property in 2024/25 is charged at: