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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 31
The annual property allowance available to individuals with property income is:
Select an option first.
Correct answer: A — £1,000
Explanation: A is correct: the property allowance of £1,000 per tax year means that if gross property income does not exceed £1,000, no tax is due and no return is needed. Where gross income exceeds £1,000, the taxpayer can choose to deduct either actual expenses or the £1,000 allowance. B, C and D are wrong — these are not the property allowance amounts.
Question 32
Finance costs (mortgage interest) on residential let properties are restricted for income tax purposes to:
Select an option first.
Correct answer: A — No deduction against rental income — replaced by a 20% tax reducer on the full finance costs
Explanation: A is correct: following the phased restriction (complete from 2020/21), finance costs on residential properties are no longer deductible against rental income. Instead, a 20% basic rate tax reducer is given on the full finance costs (or rental profits if lower). A is correct. B is wrong — full deduction no longer applies to residential property. C is wrong — 50% was a transitional figure. D is wrong — all existing mortgages were affected.
Question 33
A trading loss that cannot be set off against other income in the current year or preceding year may be:
Select an option first.
Correct answer: B — Carried forward and set off against future trading profits of the same trade
Explanation: B is correct: unrelieved trading losses are carried forward and set off against profits of the same trade in future years (without time limit under the current rules). A is wrong — losses are not lost. C is wrong — 3-year carry-back is available for terminal losses only. D is wrong — trading losses cannot automatically be set off against capital gains (though there is a specific relief for this in certain circumstances).
Question 34
Under the sideways loss relief rules, a trading loss may be set off against:
Select an option first.
Correct answer: B — The individual's total income of the current year and/or the preceding year
Explanation: B is correct: sideways loss relief (under ITA 2007 s64) allows a trading loss to be relieved against the individual's total income (from all sources) of the tax year of the loss and/or the preceding tax year. A is wrong — that is carry-forward relief. C is wrong — capital gains relief is a separate claim (and the loss must first be set against income). D is wrong — employment income is only one component of total income.
Question 35
The high income child benefit charge (HICBC) applies when adjusted net income exceeds:
Select an option first.
Correct answer: A — £60,000
Explanation: A is correct: from 2024/25, the HICBC threshold increased to £60,000. If either parent's adjusted net income exceeds £60,000, a tax charge begins to apply, equal to 1% of child benefit for each £200 of income above £60,000 (the benefit is fully clawed back when ANI reaches £80,000). B is wrong — £50,000 was the threshold up to 2023/24. C is wrong — £100,000 is the personal allowance taper threshold. D is wrong — £80,000 is where the HICBC fully claws back the child benefit.
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Question 36
For income tax purposes, a UK resident individual who is domiciled in the UK is generally assessed on:
Select an option first.
Correct answer: C — All worldwide income on the arising basis
Explanation: C is correct: a UK-resident, UK-domiciled individual is assessed on all worldwide income as it arises (the arising basis), regardless of whether it is brought to the UK. A is wrong — overseas income is also taxable. B is wrong — the remittance basis applies to non-doms, not UK-domiciled individuals. D is wrong — all income types are included.
Question 37
The remittance basis of taxation for non-domiciled individuals means:
Select an option first.
Correct answer: C — Overseas income and gains are taxed only when remitted (brought) to the UK
Explanation: C is correct: the remittance basis means that foreign income and gains are only subject to UK tax when they are remitted (brought to or enjoyed in) the UK. UK-source income is still taxed on the arising basis. A is wrong — UK income is still taxable. B is wrong — the arising basis taxes income as it arises. D is wrong — that is the position for non-residents, not remittance basis users.
Question 38
The remittance basis charge for long-term UK residents (those resident for 7 out of the previous 9 tax years) is:
Select an option first.
Correct answer: A — £30,000 per year
Explanation: A is correct: a non-domiciled individual who has been UK resident for at least 7 of the preceding 9 tax years must pay £30,000 to claim the remittance basis. B is wrong — £60,000 applies after 12 out of 14 years. C is wrong — not a standard threshold. D is wrong — the charge applies if remittance basis is claimed after 7 years.
Question 39
The ISA annual subscription limit for 2024/25 and 2025/26 is:
Select an option first.
Correct answer: A — £20,000
Explanation: A is correct: the annual ISA subscription limit remains at £20,000 for 2024/25 and 2025/26. Income and gains within an ISA are completely exempt from income tax and CGT. B is wrong — £15,000 was a prior year limit. C and D are wrong — these are not the current ISA limits.
Question 40
A Venture Capital Trust (VCT) investment gives rise to income tax relief of:
Select an option first.
Correct answer: A — 30% of the amount subscribed (up to £200,000)
Explanation: A is correct: VCT investments give income tax relief at 30% on subscriptions of up to £200,000 per tax year (in newly-issued shares). Dividends from VCTs and gains on disposal are also exempt. B is wrong — 20% is EIS/SEIS style thinking. C is wrong — 40% is not the VCT rate. D is wrong — 25% is not the rate.
Question 41
Enterprise Investment Scheme (EIS) income tax relief is given at what rate?
Select an option first.
Correct answer: A — 30% on up to £1,000,000 invested (£2,000,000 for knowledge-intensive companies)
Explanation: A is correct: EIS income tax relief is 30% on amounts subscribed for qualifying shares, up to £1,000,000 per tax year (or £2,000,000 if the excess is in knowledge-intensive companies). B is wrong — 20% and £500,000 are incorrect. C is wrong — 40% is not the EIS rate. D is wrong — 25% and £750,000 are incorrect.
Question 42
Seed Enterprise Investment Scheme (SEIS) income tax relief is given at what rate?
Select an option first.
Correct answer: A — 50% on up to £200,000 invested
Explanation: A is correct: SEIS provides 50% income tax relief on subscriptions of up to £200,000 per tax year (increased from £100,000 from 6 April 2023). B is wrong — 30% and £100,000 are incorrect. C is wrong — £100,000 was the pre-2023/24 limit. D is wrong — 25% is not the SEIS rate.
Question 43
Under the personal allowance withdrawal, a taxpayer with adjusted net income of £110,000 has a personal allowance of:
Select an option first.
Correct answer: A — £7,570
Explanation: A is correct: the taper reduces the personal allowance by £1 for every £2 above £100,000. Excess income = £110,000 − £100,000 = £10,000. Reduction = £10,000 / 2 = £5,000. Remaining PA = £12,570 − £5,000 = £7,570. B is wrong — £12,570 is the full PA before taper. C is wrong — the PA reaches nil at £125,140. D is wrong — £5,000 is the reduction, not the remaining allowance.
Question 44
What is the effective marginal rate of income tax for a taxpayer whose adjusted net income falls between £100,000 and £125,140?
Select an option first.
Correct answer: A — Effectively 60% due to the withdrawal of the personal allowance
Explanation: A is correct: every £2 of income above £100,000 results in £1 of personal allowance being withdrawn — this personal allowance is worth 40% tax relief. So on each £2 earned, 40% is paid as tax on the extra income (£0.80) plus 40% effective tax on the £1 of allowance lost (another £0.40) — combined effective rate is 60%. B is wrong — 40% is the nominal rate but ignores the allowance withdrawal. C is wrong — additional rate only applies above £125,140. D is wrong — NICs are separate.
Question 45
Basis periods under the old rules for self-employed individuals with a non-5 April year end used the 'preceding year basis'. Under the new tax year basis from 2024/25, transitional overlap profits:
Select an option first.
Correct answer: C — Are spread over 5 years from 2023/24
Explanation: C is correct: under the 2023/24 transition year rules, overlap relief (accumulated overlap profits from the old basis period rules) was given as a deduction spread over the transition year and the following 4 years (i.e. 2023/24 to 2027/28 if elected, or all in 2023/24 if not deferred). C captures the default spreading mechanism. A is wrong — they are not lost. B is wrong — they are not restricted to 2023/24 only. D is wrong — overlap relief was historically given on cessation; the new rules brought this forward.
Question 46
A sole trader's taxable trading profit for 2024/25 is £80,000. They pay personal pension contributions (net) of £8,000. Their adjusted net income is:
Select an option first.
Correct answer: A — £70,000
Explanation: A is correct: the grossed-up pension contribution = £8,000 × 100/80 = £10,000. Adjusted net income = trading profit − grossed-up pension = £80,000 − £10,000 = £70,000. B is wrong — that ignores the pension contribution. C is wrong — £72,000 = £80,000 − £8,000 (net amount, not grossed up). D is wrong — £68,000 does not follow from the calculation.
Question 47
Partnership income is assessed on each partner:
Select an option first.
Correct answer: B — On each partner's share of the tax year profits arising from the partnership
Explanation: B is correct: each partner is assessed on their share of the partnership's profits/losses for the tax year, applying the tax year basis rules. A is wrong — the tax year basis is applied, not the accounting year directly. C is wrong — partnership income is trading income, not employment income. D is wrong — cash withdrawal is not the basis.
Question 48
The cash basis for self-employed traders means:
Select an option first.
Correct answer: A — Taxing income on a received basis and deducting expenses on a paid basis
Explanation: A is correct: the cash basis for self-employed traders (where qualifying) recognises income when cash is received and deducts expenses when cash is paid — simpler than the accruals basis. B is wrong — GAAP is the accruals basis. C is wrong — that is the accruals basis. D is wrong — cash basis is for sole traders and partnerships, not companies.
Question 49
Under the spreading rules for certain lump-sum receipts (e.g. lease premiums), the taxable element of a lease premium is:
Select an option first.
Correct answer: B — The premium less 2% for each complete year of the lease after the first
Explanation: B is correct: where a landlord receives a lease premium for granting a lease of 50 years or less, the taxable element (as property income) is: Premium − [Premium × 2% × (n−1)] where n = number of years of the lease. B correctly describes this formula. A is wrong — the full premium is not all taxable. C is wrong — division by years is not the formula. D is wrong — half is not the formula.
Question 50
For income tax purposes, maintenance payments between former spouses are generally:
Select an option first.
Correct answer: B — Not deductible for the payer and not taxable for the recipient
Explanation: B is correct: under current UK tax law, qualifying maintenance payments are not deductible by the payer (for most agreements entered into after 15 March 1988) and are not taxable income for the recipient. B is the current position. A is wrong — historically payments were deductible/taxable but this changed. C and D are wrong.
Question 51
Furnished holiday lettings (FHL) were abolished from 6 April 2025. Prior to abolition, a key tax advantage was:
Select an option first.
Correct answer: B — Profits treated as relevant UK earnings for pension contribution purposes, allowing larger pension contributions
Explanation: B is correct: one of the key advantages of the FHL regime (prior to abolition from 6 April 2025) was that FHL profits counted as 'relevant UK earnings' for pension purposes — meaning owners could contribute more to a pension and get relief. A is wrong — FHL profits were trading income, not non-trading. C is wrong — losses were restricted. D is wrong — income tax was due on FHL profits.
Question 52
Interest paid by individuals on loans to invest in a partnership (as a working partner) qualifies for:
Select an option first.
Correct answer: B — Income tax relief as a deduction from total income
Explanation: B is correct: interest on a qualifying loan to invest in a close company or partnership (where the individual is a partner who personally bears the interest) qualifies for income tax relief as a deduction from total income under ITA 2007. A is wrong — qualifying loan interest is relievable. C is wrong — it is an income tax relief, not CGT. D is wrong — it is a personal relief, not a deduction in the partnership.
Question 53
For 2024/25, the income tax higher rate threshold for a UK (non-Scottish) taxpayer is:
Select an option first.
Correct answer: A — £50,270 (personal allowance £12,570 + basic rate band £37,700)
Explanation: A is correct: the higher rate threshold = personal allowance + basic rate band = £12,570 + £37,700 = £50,270. Tax at 40% applies on taxable income (above the personal allowance) that falls above £37,700. B is wrong — £37,700 is the basic rate band, not the threshold. C is wrong — £60,000 is not the threshold. D is wrong — £45,000 is not current.
Question 54
A UK-domiciled individual who becomes non-UK resident ceases to be liable to UK income tax on:
Select an option first.
Correct answer: B — Non-UK source income (subject to the statutory residence test outcomes)
Explanation: B is correct: a UK individual who becomes genuinely non-UK resident under the Statutory Residence Test (SRT) ceases to be liable to UK income tax on non-UK source income. UK source income (e.g. UK rental income, UK employment income for UK workdays) may still be taxable. A is wrong — not all income is exempt immediately. C is wrong — UK source income remains taxable. D is wrong — savings income from UK sources remains taxable.
Question 55
Income from a discretionary trust is received by beneficiaries subject to a tax credit of:
Select an option first.
Correct answer: A — 45%
Explanation: A is correct: discretionary trust income is taxed within the trust at 45% (the trust rate). When distributions are made to beneficiaries, they carry a 45% tax credit. Beneficiaries who are basic rate taxpayers may be able to reclaim some of the tax paid by the trust. B is wrong — 20% is the basic rate. C is wrong — 40% is the higher rate. D is wrong — there is a 45% tax credit.
Question 56
The starting rate band for savings income within a trust is:
Select an option first.
Correct answer: A — Not available to trustees
Explanation: A is correct: the savings starter rate band and the personal allowance are not available to trustees of discretionary trusts. Trustees pay the special trust rates (45% on income except the first £1,000 which is at the standard rates). A correctly states it is not available. B is wrong — trustees have a £1,000 standard rate band for non-discretionary income tax. C and D are the rates, not the answer.
Question 57
Trading allowance exempts from income tax trading income of up to:
Select an option first.
Correct answer: A — £1,000 per tax year
Explanation: A is correct: the trading allowance of £1,000 per tax year means that if gross trading income does not exceed £1,000, no income tax is due. Where income exceeds £1,000, the individual can choose to deduct either actual allowable expenses or the £1,000 allowance. B, C and D are wrong — these are not the trading allowance.
Question 58
An individual with employment income of £40,000 also has bank interest of £1,500. As a basic rate taxpayer, how much of the interest is taxable?
Select an option first.
Correct answer: A — £500 (£1,500 − £1,000 PSA)
Explanation: A is correct: basic rate taxpayers have a personal savings allowance of £1,000. Interest of £1,500 − £1,000 PSA = £500 is subject to income tax at the basic rate of 20%. B is wrong — the PSA shelters £1,000. C is wrong — bank interest is not in an ISA. D is wrong — £1,000 is the tax-free PSA, not the taxable amount.
Question 59
Under the accruals basis, a loan write-off between connected parties for income tax purposes:
Select an option first.
Correct answer: B — May not be deductible — specific rules restrict the deductibility of connected party bad debts
Explanation: B is correct: where a creditor and debtor are connected (e.g. a shareholder and the company they own), bad debt write-offs may not be deductible under the loan relationship rules or trading deduction rules — specific anti-avoidance provisions apply. A is wrong — connection rules restrict deductibility. C is wrong — bad debt write-offs are not generally treated as capital disposals. D is wrong — a debt write-off does not generally create employment income.
Question 60
A non-UK resident individual is subject to UK income tax on:
Select an option first.
Correct answer: B — UK source income (employment for UK workdays, UK property income, UK trading income through a UK permanent establishment)
Explanation: B is correct: non-UK residents are subject to UK income tax on UK-source income — including income from UK property, trading income through a UK permanent establishment, and income from UK employment attributable to UK workdays. A is wrong — they are taxable on UK source income. C is wrong — only non-residents pay on worldwide income if there is a double tax treaty consideration. D is wrong — not just savings.
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