ACA Tax Compliance 2

Question 1

A UK taxpayer receives gross dividends of £20,000 in 2025/26. After the £1,000 dividend allowance, how is the remaining £19,000 taxed if the taxpayer is a higher rate (40%) taxpayer?

Accepted Answer

At 33.75%

Answer

For the 2025/26 tax year, dividends received by higher rate taxpayers above the £1,000 dividend allowance are taxed at 33.75%. Basic rate taxpayers pay 8.75% and additional rate taxpayers pay 39.35% on dividend income above the allowance.

Question 2

Under the UK CGT rules for 2025/26, what is the annual exempt amount for individuals?

Accepted Answer

£3,000

Answer

The CGT annual exempt amount for individuals was reduced to £3,000 for 2024/25 onwards (from £6,000 in 2023/24 and £12,300 in 2022/23). This is the amount of capital gains an individual can realise each year before CGT becomes payable.

Question 3

A UK employer provides an employee with a company car with a list price of £30,000 and a CO2 emission rate that gives a benefit percentage of 28%. What is the annual car benefit charge?

Accepted Answer

£8,400

Answer

The car benefit charge = List price × Appropriate percentage = £30,000 × 28% = £8,400. This amount is added to the employee's taxable income. The employee then pays income tax on this benefit at their marginal rate.

Question 4

Under Making Tax Digital (MTD) for Income Tax, which taxpayers are required to maintain digital records and submit quarterly updates to HMRC?

Accepted Answer

Self-employed individuals and landlords with qualifying income above the threshold

Answer

MTD for Income Tax applies to self-employed individuals and landlords with qualifying income above the threshold (initially £50,000, then extending to lower thresholds). They must use compatible software to maintain digital records and submit quarterly updates to HMRC.

Question 5

A chargeable gain of £50,000 arises on the sale of a qualifying business asset. What rate of CGT applies if Business Asset Disposal Relief (formerly Entrepreneurs' Relief) is claimed?

Accepted Answer

10%

Answer

Business Asset Disposal Relief (BADR) applies a CGT rate of 10% on qualifying gains up to the lifetime limit of £1 million. This relief is available for disposals of all or part of a business, shares in a personal trading company, or assets used in a partnership business, subject to qualifying conditions.

ACA ICAEW Practice Test

ACA ICAEW Practice Test

ACA Tax Compliance 2