AAT L4 Personal Tax (UK Income Tax) 1 — Questions and Answers
Question 1: For the tax year 2024/25, the personal allowance is:
- £11,500
- £12,000
- £12,570 (Correct answer)
- £13,000
Correct answer: £12,570
The personal allowance for 2024/25 is £12,570 — unchanged since 2021/22. It is reduced by £1 for every £2 of adjusted net income above £100,000, reaching nil at £125,140.
Question 2: UK income tax rates for non-savings income in 2024/25 are: basic rate applies up to taxable income of:
- £25,000
- £37,700 (Correct answer)
- £50,000
- £100,000
Correct answer: £37,700
The basic rate band for income tax in 2024/25 covers taxable income from £0 to £37,700 (after personal allowance). Income above this up to £125,140 is taxed at the higher rate (40%), and above that at the additional rate (45%).
Question 3: Employment income for income tax purposes includes:
- Only salary and wages
- Salary, bonuses, benefits in kind (e.g., company car, private medical insurance), and expense allowances not wholly for business use (Correct answer)
- Employer pension contributions only
- Only cash payments from the employer
Correct answer: Salary, bonuses, benefits in kind (e.g., company car, private medical insurance), and expense allowances not wholly for business use
Employment income encompasses all remuneration from employment: salary, wages, bonuses, tips, taxable benefits in kind (e.g., company car, medical insurance), and expense reimbursements not solely for business purposes.
Question 4: The benefit in kind for a company car is calculated based on:
- The market value of the car at the employee's tax year end
- The list price of the car multiplied by the appropriate percentage based on CO2 emissions (Correct answer)
- The cost of personal use of the car per mile driven
- A fixed benefit of £3,000 per year for all company cars
Correct answer: The list price of the car multiplied by the appropriate percentage based on CO2 emissions
The taxable benefit = list price × appropriate percentage (determined by CO2 emissions band). Higher emissions attract higher percentages; zero-emission cars have the lowest benefit in kind percentage.
Question 5: Which of the following types of income is taxed first in the UK tax computation?
- Dividend income
- Savings income
- Non-savings income (employment, trade, rental) (Correct answer)
- Capital gains
Correct answer: Non-savings income (employment, trade, rental)
The ordering of income for UK tax purposes is: (1) non-savings income, (2) savings income, (3) dividends. This ordering determines which income uses the basic rate band first and how the starting rate for savings and dividend allowances apply.
Question 6: UK income tax is charged on the total income of an individual after deducting:
- Personal allowance only
- Personal allowance and reliefs such as gift aid and pension contributions (adjusted net income concept) (Correct answer)
- Only mortgage interest relief
- Business expenses only
Correct answer: Personal allowance and reliefs such as gift aid and pension contributions (adjusted net income concept)
The taxable income calculation follows: total income minus reliefs (e.g., pension contributions, gift aid) = net income; minus personal allowance = taxable income. This is the basis on which income tax is charged.
AAT L4 Personal Tax (UK Income Tax) 1
For the tax year 2024/25, the personal allowance is: