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Free ACCA Advanced Taxation Practice Questions & Answers
400 exam-style Advanced Taxation questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 1
What is the income tax personal allowance for the tax year 2024/25 and 2025/26?
Select an option first.
Correct answer: A — £12,570
Explanation: A is correct: the personal allowance has been frozen at £12,570 since 2021/22 and remains at this level for both 2024/25 and 2025/26. B, C and D are wrong — £11,500 and £12,000 applied in earlier years; £13,000 has not been the personal allowance.
Question 2
At what level of adjusted net income does the personal allowance begin to be reduced?
Select an option first.
Correct answer: A — £100,000
Explanation: A is correct: the personal allowance is tapered at the rate of £1 for every £2 of adjusted net income above £100,000, so it is reduced to nil when adjusted net income reaches £125,140. B is wrong — £50,000 is the threshold for the high income child benefit charge. C is wrong — £80,000 is not a threshold. D is wrong — £125,140 is where the allowance reaches nil, not where taper begins.
Question 3
The basic rate band for income tax in 2024/25 and 2025/26 is:
Select an option first.
Correct answer: A — £37,700
Explanation: A is correct: the basic rate band is £37,700 (covering taxable income from £1 to £37,700 above the personal allowance). B is wrong — £32,000 applied in earlier years. C and D are wrong — these are not the correct figures.
Question 4
What is the higher rate of income tax in 2024/25?
Select an option first.
Correct answer: A — 40%
Explanation: A is correct: the higher rate of income tax is 40%, applied to taxable income (excluding savings and dividends) above the basic rate limit of £37,700 up to £125,140. B is wrong — 45% is the additional rate. C is wrong — 41% is a Scottish income tax rate. D is wrong — 38% is not a UK income tax rate.
Question 5
What is the additional rate of income tax applied to non-savings, non-dividend income above £125,140?
Select an option first.
Correct answer: A — 45%
Explanation: A is correct: the additional rate is 45% on non-savings non-dividend income above £125,140 for 2024/25 and 2025/26. B is wrong — 50% was the additional rate in 2010/11 to 2012/13. C is wrong — 40% is the higher rate. D is wrong — 47% is not a UK income tax rate (it is an applicable Scottish additional rate).
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Question 6
For 2025/26, the dividend ordinary rate is:
Select an option first.
Correct answer: A — 8.75%
Explanation: A is correct: for 2024/25 the dividend ordinary rate is 8.75%. For 2025/26 it increases to 10.75% following the Autumn Budget 2024 announcement. A is the 2024/25 rate; C is 2025/26. The question asks about 2025/26 so the best answer is 10.75% (C). Corrected: C is correct for 2025/26. A (8.75%) is the 2024/25 rate. B (7.5%) was the pre-April 2022 rate. D (9.0%) is not applicable.
Question 7
The savings starter rate band applies to savings income of up to £5,000 at what rate?
Select an option first.
Correct answer: A — 0%
Explanation: A is correct: the savings starter rate of 0% applies to up to £5,000 of savings income, but only to the extent it falls within the first £5,000 of taxable income above the personal allowance. Once non-savings income exceeds the starter rate band, the 0% rate is not available. B is wrong — 20% is the basic rate. C and D are wrong — 10% and 5% are not the savings starter rate.
Question 8
The personal savings allowance for a basic rate taxpayer in 2024/25 is:
Select an option first.
Correct answer: A — £1,000
Explanation: A is correct: basic rate taxpayers receive a personal savings allowance of £1,000 per tax year. B is wrong — £500 is the PSA for higher rate taxpayers. C is wrong — £2,000 is not the PSA. D is wrong — additional rate taxpayers have £0 PSA, not basic rate taxpayers.
Question 9
The annual dividend allowance for 2024/25 and 2025/26 is:
Select an option first.
Correct answer: A — £500
Explanation: A is correct: the dividend allowance was reduced to £500 from 6 April 2024 (from £1,000 in 2023/24 and £2,000 in 2022/23). B is wrong — £1,000 was 2023/24. C is wrong — £2,000 applied from 2018/19 to 2022/23. D is wrong — £5,000 was the original 2016/17 level.
Question 10
Which of the following is NOT a relief that reduces an individual's adjusted net income?
Select an option first.
Correct answer: C — Personal allowance
Explanation: C is correct — the personal allowance is a deduction from total income in computing taxable income, not a relief that reduces adjusted net income. Adjusted net income = net income minus grossed-up Gift Aid donations and pension contributions. A is wrong — Gift Aid (grossed up) reduces ANI. B is wrong — pension contributions reduce ANI. D is wrong — trading losses relieved against total income reduce ANI.
Question 11
An individual makes a Gift Aid donation of £800. The grossed-up amount used in computing adjusted net income is:
Select an option first.
Correct answer: A — £1,000
Explanation: A is correct: Gift Aid donations are grossed up by 100/80 to allow for basic rate tax relief at source. £800 × 100/80 = £1,000. B is wrong — £800 is the net amount paid. C is wrong — £960 is not the correct grossed-up amount. D is wrong — £640 is below the amount paid.
Question 12
For a higher rate taxpayer, Gift Aid donations give rise to additional tax relief of:
Select an option first.
Correct answer: A — 20% of the grossed-up donation
Explanation: A is correct: the grossed-up donation is included in basic rate band extension (the basic rate band is extended by the grossed-up donation). For a higher rate taxpayer, this means they pay 20% (not 40%) on the grossed-up amount — equivalent to 20% of the grossed-up donation as additional relief. A states this correctly. C is close but imprecise — relief is 20% of the grossed-up amount (not net). D is wrong — total relief is 40% of grossed-up but the additional relief above basic rate is 20% of grossed-up.
Question 13
Under the accruals basis for trading income, when is revenue recognised?
Select an option first.
Correct answer: B — When the right to receive the amount arises
Explanation: B is correct: the accruals (earnings) basis recognises income when the right to receive it arises — typically when goods are delivered or services performed, regardless of when cash is received. A, C and D are all variants of cash/invoice receipt which are wrong — accruals basis is not dependent on cash receipt or invoice date per se.
Question 14
Which basis of assessment applies to income from self-employment under the trading income rules from 2024/25 onwards?
Select an option first.
Correct answer: A — Current year basis (tax year basis)
Explanation: A is correct: from 2024/25 (with 2023/24 as a transition year), the tax year (current year) basis applies to trading income — profits are assessed in the tax year in which they arise, based on the accounting period(s) ending in that tax year, or on a time-apportioned basis. B, C and D relate to the old preceding year basis rules which have been abolished.
Question 15
For income tax purposes, what is the basis of assessment for employment income?
Select an option first.
Correct answer: A — Cash basis — income assessed in the tax year in which it is received
Explanation: A is correct: employment income is taxed on a receipts basis — in the tax year in which it is received (or if earlier, the year when the employee becomes entitled to it or the employer accounts for it). B is wrong — accruals basis is for trading. C and D are wrong — payment authorisation and P60 issuance are not the basis.
Question 16
A benefit-in-kind of a company car is assessed on an employee based on:
Select an option first.
Correct answer: B — The list price of the car multiplied by the appropriate percentage based on CO2 emissions
Explanation: B is correct: the car benefit is calculated as the car's list price (including accessories) multiplied by the appropriate percentage, which is determined by the car's CO2 emissions. A is wrong — market value is not used for car benefits. C is wrong — employer cost is irrelevant for the benefit calculation. D is wrong — private mileage is not the basis for the standard car benefit.
Question 17
What is the approved mileage allowance rate for business miles in a private car for the first 10,000 miles?
Select an option first.
Correct answer: A — 45p per mile
Explanation: A is correct: the approved mileage allowance payment (AMAP) rate for using a private car for business purposes is 45p per mile for the first 10,000 miles in a tax year. B is wrong — 25p per mile applies above 10,000 miles. C is wrong — 40p per mile was the rate pre-2011. D is wrong — 50p is not the AMAP rate.
Question 18
Which of the following employment benefits is exempt from income tax?
Select an option first.
Correct answer: B — A mobile phone provided by the employer (one per employee)
Explanation: B is correct: one mobile phone per employee provided by an employer is an exempt benefit — no tax charge arises. A is wrong — employer-paid gym memberships are generally taxable unless they meet specific criteria (e.g. on-site gym available to all employees). C is wrong — private medical insurance paid by an employer is a taxable benefit. D is wrong — car fuel provided for private use gives rise to a taxable fuel benefit.
Question 19
The benefit-in-kind for living accommodation provided rent-free to an employee is based on:
Select an option first.
Correct answer: A — The gross rateable value (or annual value) of the property
Explanation: A is correct: the annual benefit for basic accommodation is the annual value (broadly equivalent to the gross rateable value or market rental value used for rating purposes). An additional benefit applies when the property cost more than £75,000. B is wrong — market rent is not the standard starting point (it may be used where there is no rateable value). C is wrong — cost is relevant only for the additional charge above £75,000. D is wrong — rooms are not the basis.
Question 20
Under the PAYE system, an employer must account for income tax on employment income:
Select an option first.
Correct answer: B — Monthly (or weekly) as the employee is paid
Explanation: B is correct: under PAYE, employers deduct income tax and NICs from employees' pay in real time — the deductions are made when pay is processed (weekly or monthly) and paid to HMRC by the 19th (22nd if paid electronically) of the following tax month. A is wrong — P60 is an annual summary only. C is wrong — self-assessment is a separate obligation. D is wrong — quarterly is not the standard PAYE cycle.
Question 21
Class 1 National Insurance Contributions (NICs) are payable by:
Select an option first.
Correct answer: B — Both employees (primary) and employers (secondary) based on earnings
Explanation: B is correct: Class 1 NICs consist of primary contributions (employee) and secondary contributions (employer), both calculated on earnings. A is wrong — self-employed pay Class 4 NICs. C is wrong — while directors pay Class 1 NICs, B is more comprehensive. D is wrong — landlords pay Class 2/4 if self-employed, not Class 1.
Question 22
For 2024/25 and 2025/26, the main rate of employee Class 1 NICs is:
Select an option first.
Correct answer: A — 8%
Explanation: A is correct: the main rate of employee (primary) Class 1 NICs was cut from 12% to 10% from 6 January 2024, then further reduced to 8% from 6 April 2024 onwards — so 8% applies for 2024/25 and 2025/26. B is wrong — 10% applied only from 6 January to 5 April 2024. C is wrong — 12% was the main rate before 6 January 2024. D is wrong — 6% is not the current rate.
Question 23
The employer (secondary) Class 1 NIC rate for 2025/26 is:
Select an option first.
Correct answer: A — 15%
Explanation: A is correct: the employer NIC rate increased from 13.8% to 15% from 6 April 2025, and the secondary threshold was reduced from £9,100 to £5,000 per year. B is wrong — 13.8% was the rate up to 5 April 2025. C and D are wrong — 12% and 10% are employee rates, not employer rates.
Question 24
Class 2 National Insurance Contributions for the self-employed from 2024/25 onwards:
Select an option first.
Correct answer: B — Are abolished — no longer payable on a compulsory basis
Explanation: B is correct: from 6 April 2024, Class 2 NICs are effectively abolished for most self-employed people (they will no longer pay Class 2 on profits above the lower profits limit). A is wrong — that was the pre-2024/25 position. C is wrong — 9% was a historical Class 4 rate. D is wrong — Class 2 was a flat-rate weekly charge, not earnings-based like Class 1.
Question 25
Class 4 NICs are charged on self-employed profits at what rates for 2024/25?
Select an option first.
Correct answer: A — 8% on profits between £12,570 and £50,270; 2% above £50,270
Explanation: A is correct: from 6 April 2024, the main Class 4 NIC rate was reduced from 9% to 8% (on profits between the lower profits limit of £12,570 and the upper profits limit of £50,270), with 2% above £50,270. B is wrong — 9% was the 2023/24 rate. C is wrong — 6% and the old lower profits limit are incorrect. D is wrong — 10% is not the Class 4 rate.
Question 26
The annual pension annual allowance for 2024/25 and 2025/26 is:
Select an option first.
Correct answer: A — £60,000
Explanation: A is correct: the annual allowance for pension contributions (the amount that can be contributed to a pension and attract tax relief in a tax year) is £60,000 for 2024/25 and 2025/26 (increased from £40,000 from 6 April 2023). B is wrong — £40,000 was the limit up to 2022/23. C and D are wrong — these are not the current annual allowances.
Question 27
Pension contributions attract income tax relief in which way for basic rate taxpayers under the relief at source method?
Select an option first.
Correct answer: A — The employee pays net contributions; the pension scheme claims 20% basic rate relief from HMRC, adding it to the fund
Explanation: A is correct: under the relief at source method, the employee pays net of basic rate tax (i.e. 80% of the intended gross contribution), and the pension scheme administrator claims the 20% basic rate tax relief directly from HMRC. Higher rate taxpayers claim additional relief via self-assessment or an adjustment to their tax code. B is wrong — that describes the net pay arrangement. C is wrong — that is an employer pension contribution. D is wrong.
Question 28
The maximum pension contribution on which tax relief is available in any tax year (other than when carry forward applies) is:
Select an option first.
Correct answer: A — The lower of £60,000 and 100% of relevant UK earnings
Explanation: A is correct: tax-relievable contributions are capped at the lower of: (a) the annual allowance (£60,000) and (b) 100% of the individual's relevant UK earnings for the year. The minimum gross contribution for those with no earnings is £3,600. B is wrong — earnings must also be sufficient. C is wrong — taking the higher would allow relief on amounts exceeding earnings. D is wrong — £3,600 is a separate minimum, not the maximum.
Question 29
Property income is generally assessed on which basis?
Select an option first.
Correct answer: B — Accruals basis (property treated as a single business)
Explanation: B is correct: UK property income is assessed on the accruals basis — treating all UK properties as a single business and recognising income when it accrues (when the tenant has the right to occupy) and expenses when incurred. A is wrong — cash basis was historically available but accruals is the general rule. C is wrong — all UK properties are pooled. D is wrong — receipt is the cash basis, not the accruals basis.
Question 30
Which of the following expenses is NOT allowable as a deduction against property income?
Select an option first.
Correct answer: B — Capital expenditure on improving the property
Explanation: B is correct — capital expenditure on improvements is not deductible against property income. Only revenue expenditure (maintaining the property in its existing condition) is deductible; capital expenditure may qualify for capital allowances or will increase the cost base for CGT. A is wrong — letting agent fees are allowable. C is wrong — repairs and maintenance are allowable. D is wrong — insurance is allowable.
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