Mock Exam

Time Allowed: 90 minutes

Supplementary Information
1. You should assume that the tax rates and allowances for the tax year 2022-23 and for the financial year to
31 March 2023 will continue to apply for the foreseeable future unless you are instructed otherwise.
2. Calculations and workings need only be made to the nearest £.
3. All apportionments should be made to the nearest month.
4. All workings should be shown.

Tax Rates and Allowances

The following tax rates and allowances are to be used in answering the questions.

Income tax
Normal rates Dividend rates
Basic rate £1 - £37,700 20% 7.5%
Higher rate £37,701 - £150,000 40% 32.5%
Additional Rate £150,001 and over 45% 38.1%

Savings rate nil rate band - Basic rate taxpayers £1,000

- Higher rate taxpayers £500
Dividend nil rate band £2,000

A starting rate of 0% applies to savings income where it falls within the first £5,000 of taxable income.

Personal allowance
£
Personal allowance 12,570
Transferable Amount 1,260
Income limit 100,000

Where adjusted net income is £125,140 or more, the personal allowance is reduced to zero.

Residence status

Days in UK Previously resident Not previously resident

Less than 16 Automatically not resident Automatically not resident
16 to 45 Resident if 4 UK ties (or more) Automatically not resident
46 to 90 Resident if 3 UK ties (or more) Resident if 4 UK ties
91 to 120 Resident if 2 UK ties (or more) Resident if 3 UK ties (or more)
121 to 182 Resident if 1 UK tie (or more) Resident if 2 UK ties (or more)
183 or more Automatically resident Automatically resident

Child benefit income tax charge

Where income is between £50,000 and £60,000, the charge is 1% of the amount of child benefit received for
every £100 of income over £50,000.

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 Car benefit percentage

The relevant base level of CO2 emissions is 55 grams per kilometre.

The percentage rates applying to petrol-powered cars (and diesel-powered cars reaching the RDE2 standard)
with CO2 emissions up to this level are:

51 grams to 54 grams per kilometre 15%

55 grams per kilometer 16%

The percentage for electric-powered cars with zero CO2 emissions is 2%.

For hybrid-electric cars with CO2 emissions between 1 and 50 g/km, the electric range of the car is relevant:

Electric Range

130 miles or more 2%

70 to 129 miles 5%
40 to 69 miles 8%
30 to 39 miles 12%
Less than 30 miles 14%

Car fuel benefit

The base figure for calculating the car fuel benefit is £25,300

Company van benefits

The company van benefit scale charge is £3,600 and the van fuel benefit is £688.

Vans producing zero CO2 emissions (zero emission vans) have a zero % benefit.

Individual savings accounts (ISAs)

The overall investment limit is £20,000

Pension scheme limits

Annual allowance £40,000

Minimum allowance £4,000
Income limit £240,000
Lifetime Allowance £1,073,100

The maximum contribution that can qualify for tax relief without any earnings is £3,600.

Approved mileage allowances: cars

Up to 10,000 miles 45p

Over 10,000 miles 25p

Capital Allowances: rates of allowances

Plant and machinery

Main pool 18%
Special rate pool 6%

Cars
New cars with zero CO2 emissions 100%
CO2 emissions between 1 and 50 grams per kilometre 18%

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CO2 emissions over 50 grams per kilometre 6%
Annual investment allowance
Rate of allowance 100%
Expenditure Limit £1,000,000

Enhanced Capital Allowances for Companies

Main Pool Super Deduction 130%
Special Rate Pool First Year Allowance 50%

Commercial Structures and Buildings

Straight-line Allowance 3%

Cash basis accounting

Revenue limit £150,000

Cap on Income Tax Reliefs

Unless otherwise restricted, reliefs are capped at the higher of £50,000 or 25% of income.

Corporation tax

Rate of tax - Financial Year 2022 19%

- Financial Year 2021 19%
- Financial Year 2020 19%
Profit threshold £1,500,000

Value added tax (VAT)

Standard rate 20 %
Registration limit £85,000
Deregistration limit £83,000

Inheritance tax: tax rates

Nil rate band £325,000

Residence nil rate band £175,000
Rates of tax on excess - Lifetime rate 20%
- Death rate 40%

Inheritance tax: taper relief

Years before death Percentage reduction
Over 3 but less than 4 years 20%
Over 4 but less than 5 years 40%
Over 5 but less than 6 years 60%
Over 6 but less than 7 years 80%

Capital gains tax: tax rates

Normal Rates Residential Property

Lower rate 10% 18 %
Higher rate 20% 28 %

Annual exempt amount £12,300

Capital gains tax: business asset disposal relief (formerly entrepreneurs’ relief) and investors’ relief

Lifetime limit – business asset disposal relief £1,000,000

– investors’ relief £10,000,000

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Rate of tax 10 %
National insurance contributions

Class 1 employee £1 - £12,570 per year Nil

£12,571 - £50,270 per year 13.25%
£50,271 and above per year 3.25%

Class 1 employer £1 - £9,100 per year Nil

£9,101 and above per year 15.05%
Employment Allowance £5,000

Class 1A 15.05%

Class 2 £3.15 per week

Lower Profits Limit £12,570

Class 4 £1 - £12,570 per year Nil

£12,571 - £50,270 per year 10.25%
£50,271 and above per year 3.25%

Rates of Interest (assumed)

Official rate of interest 2%

Rate of interest on underpaid tax 2.60%
Rate of interest on overpaid tax 0.50%

Standard penalties for errors

Taxpayer behavior Maximum penalty Minimum penalty - Minimum penalty-
Unprompted disclosure prompted disclosure
Deliberate and concealed 100% 30% 50%
Deliberate but not concealed 70% 20% 35%
Careless 30% 0% 15%

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Section A

ALL 15 questions are compulsory and MUST be attempted

1. Anna has taxable income for the tax year 2022-23 as follows:

Non-Savings income £2,000

Savings income £9,500

What is her income tax liability for the tax year 2022-23?

A £4,840
B £8,204
C £3,200
D £4,760 (2 marks)

2. In the tax year 2022-23 Billy has taxable income (after deduction of his personal allowance) consisting of
£40,000 of non-savings income and £12,000 of dividend income.

What is his income tax liability for the tax year 2022-23? (2 marks)

3. Chris is self-employed and for the year ended 5 April 2023 his trading profit was £110,000. During the tax
year 2022-23, he made a gift aid donation of £1,600 (net) to a national charity.

What amount of personal allowance will he be entitled to for the tax year 2022-23? (2 marks)

4. Danny and Elena are a married couple. In the tax year 2022-23, Danny has employment income of £35,000.
Elena has no income in the tax year 2022-23. Elena has made an election in relation to her personal
allowance for the tax year 2022-23.

What is Danny’s income tax liability for the tax year 2022-23? (2 marks)

5. Which of the following types of income are exempt from income tax?
o Dividends from a company
o Interest received from an Individual Savings Account
o Premium Bond prize
o Interest on NS&I Savings Certificate
o Interest on government securities (2 marks)

6. For the tax year 2022-23 Francis has trading profit of £54,000. She received child benefit of £1,800 during
the year.

How much is the child benefit income tax charge? (2 marks)

7. Gina is self-employed, and her trading income for 2022-23 is £60,000. She pays £1,600 (net) into a
personal pension scheme. She does not have any brought forward unused annual allowances.

Calculate her income tax liability. (2 marks)

8. Harry owns a house, which he rents out fully furnished.

During April 2022 Harry furnished the property with a cooker costing £440, a washing machine costing
£330, and floor coverings costing £2,200. The cooker was sold during December 2022 for £110 and
replaced with a similar model costing £460. The washing machine was scrapped, with nil proceeds, during
March 2023. It was replaced by a washer-dryer costing £670, although the cost of a similar washing
machine would have been £360.

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 What is the total amount that Harry would be able to claim as an expense when calculating his property
business profit for the tax year 2022-23? (2 marks)

9. Since 6 April 2022, Ian has let out an unfurnished freehold office building. On that date, the tenant paid Ian
a premium of £40,000 for the grant of a 15-year lease.

How much of the premium of £40,000 will Ian include when calculating his property business profit for
the tax year 2022-23? (2 marks)

10. James rents out a furnished room in his own residence throughout 2022-23. The rent is £200 a week. James’
expenses of the letting are £50 per week.

What is James’ property business profit for 2022-23 if he makes any relevant election? (2 marks)

11. Nicola bought a residential property on 6 April 2022. She let it out immediately at an annual rent of £2,000
per month, all of which was received in the tax year 2022/23. Nicola had bought the property using an
interest-only mortgage. The interest paid in the tax year 2022/23 was £9,500. She paid £2,400 in the year to
a managing agent.

For many years Nicola’s only income has been employment income of £60,000.

What is Nicola’s additional income tax liability in respect of her property business income in the tax year
2022/23?

A £8,640
B £7,700
C £6,740
D £4,840 (2 marks)

12. From 1 July 2022, Morgan was provided with a house to live in by his employer, at which time the market
value was £155,000. The house had been purchased by the employer in July 2012 for £125,000.
Improvements valued at £20,000 were done on the house during December 2021. The house has an annual
value of £10,000.

What is the taxable benefit to Morgan in 2022-23? (2 marks)

13. Nina was provided with a hybrid-electric company car throughout the tax year 2022-23. The motor car has
a list price of £40,000, an official CO2 emission rate of 18 grams per kilometre and an electric range of 50
miles.

Nina made a capital contribution of £7,000 towards the cost of the car.

What is the taxable car benefit to Nina in 2022-23? (2 marks)

14. Wan ceased trading on 31 December 2022, having been self-employed since 1 January 2009. On 1 January
2022, the tax written down value of her plant and machinery main pool was £6,200. On 10 November 2022,
Wan purchased a computer for £1,600. All of the items included in the main pool were sold for £9,800 on
31 December 2022.

What is the balancing charge which will arise upon the cessation of Wan’s trade?

A £4,716
B £3,404

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 C £2,000
D £3,600 (2 marks)

15. Phillip is a sole trader who prepares accounts to 5 April each year. He purchased a motor car for both
business and private use on 6 April 2022. The motor car has CO2 emissions of 160 grams per kilometre and
cost £22,000. In the year to 5 April 2023, Phillip drove a total of 9,000 miles of which 4,950 miles were for
business journeys.

What is the maximum capital allowance that Phillip can claim in respect of the motor car for the period of
account to 5 April 2023?

A £2,178
B £3,960
C £1,320
D £726 (2 marks)

Section B

Question 1

Peter Chic is employed by Haute-Couture Ltd as a fashion designer. The following information is available for
the tax year 2022/23:

Employment

(1) During the tax year 2022/23 Peter was paid a gross annual salary of £44,260 by Haute-Couture Ltd. Income
tax of £14,270 was deducted from this figure under PAYE.

(2) Throughout the tax year 2022/23 Haute-Couture Ltd provided Peter with a diesel powered motor car (that
does not meet the RDE2 standard) which has a list price of £22,500. The motor car cost Haute-Couture Ltd
£21,200, and it has an official CO2 emission rate of 147 grams per kilometre. Peter made a capital
contribution of £2,000 towards the cost of the motor car when it was first provided to him. Haute-Couture
Ltd also provided Peter with fuel for private journeys.

(3) Haute-Couture Ltd has provided Peter with living accommodation since 1 January 2022. The company had
purchased the property in 2019 for £160,000, and it was valued at £185,000 on 1 January 2022.
Improvements costing £13,000 were made to the property during June 2021. The annual value of the
property is £8,225.

(4) Throughout the tax year 2022/23 Haute-Couture Ltd provided Peter with two mobile telephones. The
telephones had each cost £250 when purchased by the company in January 2022.

(5) On 5 January 2023 Haute-Couture Ltd paid a health club membership fee of £510 for the benefit of Peter.

(6) During February 2023 Peter spent five nights overseas on company business. Haute-Couture Ltd paid Peter
a daily allowance of £10 to cover the cost of personal expenses such as telephone calls to his family.

Other information

(1) During the tax year 2022/23 Peter received building society interest of £2,000 and dividends of £4,000.

(2) On 4 August 2022 Peter received a premium bond prize of £100.

(3) During the tax year 2022/23 Peter made gift aid donations totaling £2,400 (net).

Required

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Calculate the income tax payable by Peter Chic for the tax year 2022/23. You should indicate by the use of zero
any items that are non-taxable/exempt from tax. (10 marks)

Question 2

Na Style commenced self-employment as a hairdresser on 1 January 2019.

The following information is available for the tax year 2022/23:

(1) Na’s income statement for the year is as follows:

Note £ £
Income 63,635

Expenses:
Depreciation 2,635
Motor expenses 2 2,200
Professional fees 3 1,650
Property expenses 4 12,900
Purchases 5 4,700
Other expenses 6 16,550
(40,635)
Net profit 23,000

(2) Na charges all the running expenses for her motor car to the business. During the year Na drove a total
of 8,000 miles of which 7,000 were for private journeys.

(3) The figure for professional fees consists of £390 for accountancy and £1,260 for legal fees in
connection with the grant of a new five-year lease of parking spaces for customers’ motor cars.

(4) Na lives in a flat that is situated above her hairdressing studio, and one-third of the total property
expenses of £12,900 relate to this flat.

(5) During the year Na took goods out of the hairdressing business for her personal use without paying for
them, and no entry has been made in the accounts to record this. The goods cost £250 (an amount that
has been deducted under ‘purchases’) and had a selling price of £450.

(6) The figure for other expenses of £16,550 includes £400 for a fine in respect of health and safety
regulations, £80 for a donation to a political party, and £160 for a trade subscription to the Guild of
Small Hairdressers.

(7) Na uses her private telephone to make business telephone calls. The total cost of the private telephone
for the year was £1,200, and 20% of this related to business telephone calls. The cost of the private
telephone is not included in the income statement expenses of £40,635.

(8) Capital allowances for the year are £810.

Other information

(1) During the tax year 2022/23, Na received interest of £1,100 on the maturity of a savings certificate
from the National Savings & Investments Bank and building society interest of £1,500.

Required:

Calculate the income tax payable by Na Style for the tax year 2022/23. You should indicate by the use of zero
any items that are non-taxable/exempt from tax. (10 marks)