Unofficial practice for the ACCA Taxation (TX-UK) exam. Not affiliated with or endorsed by ACCA.
Practice · Syllabus B1, B4(f), B5, B7(b), (c)
The personal allowance falls by £1 for every £2 of adjusted net income over £100,000.
The income tax computation
Asha is employed on a salary of £46,030. In the tax year 2025-26 she also received bank interest of £1,500 and dividends of £5,540.
She has no other income and made no pension contributions or gift aid donations.
What is Asha's income tax liability for the tax year 2025-26? (2 marks)
The supplementary instructions and the tax rates and allowances, as the exam provides them (Finance Act 2025).
| Normal rates | Dividend rates | ||
|---|---|---|---|
| Basic rate | £1 – £37,700 | 20% | 8·75% |
| Higher rate | £37,701 – £125,140 | 40% | 33·75% |
| Additional rate | £125,141 and over | 45% | 39·35% |
| Savings income nil rate band – Basic rate taxpayers | £1,000 | ||
| Savings income nil rate band – Higher rate taxpayers | £500 | ||
| Dividend nil rate band | £500 |
A starting rate of 0% applies to savings income where it falls within the first £5,000 of taxable income.
| £ | |
|---|---|
| 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.
| 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 |
Where income is between £60,000 and £80,000, the charge is 1% of the amount of child benefit received for every £200 of income over £60,000.
| The relevant base level of CO2 emissions is 55 grams per kilometre. | |
| The percentage rates applying to petrol cars (and diesel cars meeting the RDE2 standard) with CO2 emissions up to this level are: | |
| 51 grams to 54 grams per kilometre | 16% |
|---|---|
| 55 grams per kilometre | 17% |
| The percentage for electric cars with zero CO2 emissions is 3%. | |
| For hybrid-electric cars with CO2 emissions between 1 and 50 grams per kilometre, the electric range of the car is relevant: | |
| Electric range | |
| 130 miles or more | 3% |
| 70 to 129 miles | 6% |
| 40 to 69 miles | 9% |
| 30 to 39 miles | 13% |
| Less than 30 miles | 15% |
The base figure for calculating the car fuel benefit is £28,200.
The company van benefit scale charge is £4,020, and the van fuel benefit is £769.
Vans producing zero CO2 emissions have a 0% benefit.
The overall investment limit is £20,000.
The rent-a-room relief limit is £7,500.
| Annual allowance – 2022–23 | £40,000 |
|---|---|
| – 2023–24 to 2025–26 | £60,000 |
| Minimum allowance | £10,000 |
| Income limit | £260,000 |
The maximum contribution which can qualify for tax relief without any earnings is £3,600.
| Up to 10,000 miles | 45p |
|---|---|
| Over 10,000 miles | 25p |
| Plant and machinery | |
| Main pool | 18% |
|---|---|
| Special rate pool | 6% |
| Cars | |
| New cars with zero CO2 emissions | 100% |
| Second-hand cars with zero CO2 emissions | 18% |
| CO2 emissions between 1 and 50 grams per kilometre | 18% |
| 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 first year allowance | 100% |
| Special rate pool first year allowance | 50% |
| Structures and buildings allowance | |
| Straight-line allowance | 3% |
Unless otherwise restricted, reliefs are capped at the higher of £50,000 or 25% of income.
| Financial year | 2023 | 2024 | 2025 |
|---|---|---|---|
| Small profits rate | 19% | 19% | 19% |
| Main rate | 25% | 25% | 25% |
| Lower limit | £50,000 | £50,000 | £50,000 |
| Upper limit | £250,000 | £250,000 | £250,000 |
| Standard fraction | 3/200 | 3/200 | 3/200 |
(Upper limit – augmented profits) x standard fraction x taxable total profits / augmented profits
| Profit threshold | £1,500,000 |
|---|
| Standard rate | 20% |
|---|---|
| Registration limit | £90,000 |
| Deregistration limit | £88,000 |
| Days late | Penalty |
|---|---|
| Up to 15 days | None |
| 16 to 30 days | 3% |
| More than 30 days | 6% plus a daily penalty at an annual rate of 10% |
| Nil rate band | £325,000 |
|---|---|
| Residence nil rate band | £175,000 |
| Rate of tax on excess – Lifetime rate | 20% |
| – Death rate | 40% |
| Years before death | Percentage reduction |
|---|---|
| More than 3 but less than 4 years | 20% |
| More than 4 but less than 5 years | 40% |
| More than 5 but less than 6 years | 60% |
| More than 6 but less than 7 years | 80% |
| Lower rate | 18% |
|---|---|
| Higher rate | 24% |
| Annual exempt amount | £3,000 |
| Lifetime limit – business asset disposal relief | £1,000,000 |
|---|---|
| – investors’ relief | £1,000,000 |
| Rate of tax | 14% |
| Class 1 Employee | £1 – £12,570 per year | Nil |
|---|---|---|
| £12,571 – £50,270 per year | 8% | |
| £50,271 and above per year | 2% | |
| Class 1 Employer | £1 – £5,000 per year | Nil |
| £5,001 and above per year | 15% | |
| Employment allowance | £10,500 | |
| Class 1A | 15% | |
| Class 4 | £1 – £12,570 per year | Nil |
| £12,571 – £50,270 per year | 6% | |
| £50,271 and above per year | 2% |
| Official rate of interest | 3·75% |
|---|---|
| Rate of interest on underpaid tax | 8·50% |
| Rate of interest on overpaid tax | 3·50% |
| Taxpayer behaviour | Maximum penalty | Minimum penalty – unprompted disclosure | Minimum penalty – prompted disclosure |
|---|---|---|---|
| Deliberate and concealed | 100% | 30% | 50% |
| Deliberate but not concealed | 70% | 20% | 35% |
| Careless | 30% | 0% | 15% |