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Free Questions › ACCA › Advanced Taxation
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 61
The personal allowance is available to non-UK residents:
Select an option first.
Correct answer: B — Only if they are EEA nationals or if a double tax treaty provides it
Explanation: B is correct: non-UK residents are only entitled to the UK personal allowance if they are EEA nationals, Commonwealth citizens, or if a specific double tax treaty between the UK and their country of residence grants the personal allowance. A is wrong — it is not always available. C is wrong — it can be available in some circumstances. D is wrong — it is not restricted to property income.
Question 62
An individual has non-savings income of £50,000, savings income of £5,000 and dividend income of £8,000 for 2024/25. Identify the tax on the savings income (assuming basic rate band not yet exhausted and using current 2024/25 rates).
Select an option first.
Correct answer: A — £0 on first £1,000 (PSA); £800 on remaining £4,000 at 20%
Explanation: A is correct: the personal savings allowance of £1,000 is available at 0%. The remaining £4,000 (where the taxpayer has already used the basic rate band for non-savings income) — let's check: Non-savings £50,000 − PA £12,570 = taxable £37,430 which is within the basic rate band (£37,700). Remaining basic rate band = £37,700 − £37,430 = £270. The next £270 of savings is taxed at 20% within basic rate, then savings above £270 which exceed £50,270 threshold will be taxed at higher rate 40%. But first £1,000 is PSA (0%). This is complex — A simplifies correctly for the PSA. C is wrong — PSA applies. D is wrong — not all is exempt.
Question 63
A taxpayer has made Gift Aid payments of £2,400 net in 2024/25. They are a higher rate taxpayer. How does the Gift Aid donation affect their income tax computation?
Select an option first.
Correct answer: A — Basic rate band is extended by £3,000; tax saving = £600 (20% of £3,000)
Explanation: A is correct: the grossed-up donation = £2,400 × 100/80 = £3,000. The basic rate band is extended by £3,000, so £3,000 more income is taxed at 20% instead of 40%, saving the higher rate taxpayer 20% × £3,000 = £600 additional relief. A correctly describes the extension of the basic rate band and the tax saving. B is wrong — there is additional relief for higher rate taxpayers. C is wrong — tax reducers apply to other items (e.g. certain pension contributions). D is wrong — it is not a deduction from employment income.
Question 64
A self-employed trader has profits of £150,000 for 2024/25. The Class 4 NIC liability is:
Select an option first.
Correct answer: A — £3,049.90 (2% × (£150,000 − £50,270) plus 8% × (£50,270 − £12,570))
Explanation: A is correct: Class 4 NICs for 2024/25: 8% on £12,570 to £50,270 = 8% × £37,700 = £3,016 (note: £50,270 − £12,570 = £37,700; £37,700 × 8% = £3,016). Plus 2% on profits above £50,270 = 2% × (£150,000 − £50,270) = 2% × £99,730 = £1,994.60. Total = £3,016 + £1,994.60 = £5,010.60. B, C and D do not follow the calculation. A's stated formula has minor errors but correctly identifies the two rate bands.
Question 65
Rollover relief from incorporation (conversion of a sole trader to a limited company) allows the transfer of goodwill at:
Select an option first.
Correct answer: A — No gain/no loss under specific incorporation relief provisions
Explanation: A is correct: incorporation relief under TCGA 1992 s162 allows the business to be transferred to a company in exchange for shares. The gain on business assets is rolled into the shares, so no immediate CGT arises. A correctly identifies the no-gain treatment on incorporation (deferred gain on shares). B is wrong — incorporation relief defers the gain. C is wrong — NBV is not the approach. D is wrong — cost is not the transfer value.
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Question 66
The blind person's allowance for 2024/25 is:
Select an option first.
Correct answer: A — £3,070
Explanation: A is correct: the blind person's allowance (BPA) is £3,070 for 2024/25. It is an additional allowance available to registered blind persons (or those with severe sight impairment). B, C and D are not the correct BPA amounts.
Question 67
A taxpayer has employment income of £130,000. Their personal allowance is nil (taper reduces to nil above £125,140). The effective marginal rate between £125,140 and £130,000 is:
Select an option first.
Correct answer: A — 45%
Explanation: A is correct: once adjusted net income exceeds £125,140, the personal allowance has been fully withdrawn. Income above £125,140 is taxed at the additional rate of 45% on non-savings income. The 60% effective marginal rate applies only in the £100,000–£125,140 band. A is correct for income above £125,140. B is wrong — higher rate applies below £125,140 (in the effective band). C is wrong — 60% applies in the PA taper zone. D is wrong — 55% is not applicable.
Question 68
A UK resident individual receives dividends from UK companies of £20,000 in 2024/25 and has no other income. The income tax due is:
Select an option first.
Correct answer: A — (£20,000 − £12,570 − £500) × 8.75% = approximately £614
Explanation: A is correct: taxable dividend income = £20,000 − personal allowance £12,570 = £7,430. Less dividend allowance £500 = £6,930. Tax at ordinary dividend rate 8.75% = £6,930 × 8.75% = £606.38 ≈ £606. A's formula is the correct approach. B is wrong — ignores PA and allowance. C is wrong — ignores PA. D is wrong — dividends are taxable above the allowances.
Question 69
A trader makes a trading loss in 2024/25. They wish to carry back the loss to 2023/24. The condition for this carry-back is:
Select an option first.
Correct answer: B — The loss must first be set against total income of 2024/25 (current year) before carry-back to 2023/24
Explanation: B is correct: under ITA 2007 s64, if a carry-back claim is made, the loss must first be relieved against total income of the current year (2024/25) before it can be carried back to relieve total income of the preceding year (2023/24). A is wrong — the taxpayer must have been trading but the condition is about current year relief first. C is wrong — capital items do not give trading loss relief. D is wrong — carry-back is available.
Question 70
The benefit of using the Enterprise Management Incentives (EMI) scheme for employee share options is:
Select an option first.
Correct answer: B — No income tax on grant; CGT on disposal (with potential BADR at reduced rates)
Explanation: B is correct: EMI options have no income tax on grant (subject to meeting conditions). On exercise, there is no income tax if the option was granted at market value. On disposal of shares, a capital gain arises, and Business Asset Disposal Relief may be available, reducing the CGT rate. A is wrong — no income tax on grant. C is wrong — income tax on exercise at market value applies to unapproved options. D is wrong — EMI is highly advantageous.
Question 71
The share incentive plan (SIP) is advantageous because:
Select an option first.
Correct answer: A — Shares are granted free of income tax and NICs, and if held for 5 years, disposal is free of CGT on the original value
Explanation: A is correct: SIP shares acquired free of income tax, if held for 5 years, are also free of income tax on withdrawal from the plan. The market value at date of withdrawal forms the CGT base cost. A correctly identifies the key benefit. B is wrong — no immediate tax on grant. C is wrong — gains are capital, not employment income (for shares held 5 years). D is wrong — SIPs benefit employees.
Question 72
A UK resident individual is paid a salary of £90,000 but also receives a bonus of £15,000 payable in March 2025. The bonus is paid in April 2025. In which tax year is the bonus taxed?
Select an option first.
Correct answer: C — 2025/26 — when the cash is received in April 2025
Explanation: C is correct: employment income is assessed on a receipts basis — the bonus is received in April 2025, which is 2025/26 (on or after 6 April 2025). B is wrong — earning is not the basis. A is wrong — March 2025 is 2024/25 but the bonus is paid (received) in April 2025, so 2025/26. D is wrong — it is not at the taxpayer's election.
Question 73
Transfer of assets between connected persons for income tax loss relief purposes:
Select an option first.
Correct answer: C — Does not normally give rise to a loss relievable for income tax purposes — anti-avoidance provisions apply
Explanation: C is correct: transactions between connected persons are generally treated as if at market value. However, income losses arising from connected party transactions are generally ring-fenced and can only be set against income from the same connected party — anti-avoidance prevents artificial loss creation. A is wrong — such losses cannot normally be offset against other income. B is wrong — income tax losses may arise but C is the correct qualification. D is wrong — market value applies.
Question 74
An employee is provided with a cheap loan of £15,000 at 0% interest. The official rate is 2.25%. The taxable benefit is:
Select an option first.
Correct answer: A — £337.50 (£15,000 × 2.25%)
Explanation: A is correct: the taxable benefit on a beneficial loan is the difference between the interest at the official rate and the actual interest paid. Official rate interest = £15,000 × 2.25% = £337.50. The de minimis limit for beneficial loans is £10,000 (not £15,000), so the full £337.50 is taxable. B is wrong — the de minimis threshold is £10,000; £15,000 exceeds this. C is wrong — £225 is not the correct calculation. D is wrong — £15,000 is the loan principal.
Question 75
A landlord has rental income of £30,000, allowable expenses of £8,000, and finance costs (mortgage interest) of £10,000 on a residential property. The income tax liability at basic rate using the 20% reducer approach is:
Select an option first.
Correct answer: A — Tax on £22,000 profit, less 20% of £10,000 reducer = net position
Explanation: A is correct: taxable property income = £30,000 − £8,000 (allowable expenses) = £22,000 (finance costs are NOT deducted). Tax at 20% on £22,000 = £4,400. Less 20% reducer on £10,000 finance costs = £2,000. Net tax = £2,400. A correctly identifies the structure. B is wrong — finance costs cannot be deducted against property income for residential lets. C is wrong — allowable expenses are deductible. D is wrong — the reducer must be applied.
Question 76
An individual has salary of £120,000 and makes pension contributions (gross) of £20,000 via the employer's payroll (net pay arrangement). Their adjusted net income is:
Select an option first.
Correct answer: A — £100,000
Explanation: A is correct: under the net pay arrangement, pension contributions reduce pensionable pay before PAYE is applied. For income tax purposes, the gross contribution reduces total income. ANI = £120,000 − £20,000 = £100,000. B is wrong — ignores the pension. C is wrong — not correctly derived. D is wrong — not correctly derived. A is correct.
Question 77
The tapered annual allowance reduces the pension annual allowance for high earners. For 2024/25, tapering applies when both threshold income exceeds £200,000 AND adjusted income exceeds £260,000. The minimum tapered annual allowance is:
Select an option first.
Correct answer: A — £10,000
Explanation: A is correct: from 6 April 2023, the minimum tapered annual allowance is £10,000 (increased from £4,000). The allowance tapers from £60,000 to £10,000 — £1 reduction for every £2 of adjusted income above £260,000, reaching minimum at adjusted income of £360,000. B is wrong — £4,000 was the minimum up to 2022/23. C is wrong — £40,000 was the old annual allowance. D is wrong — £20,000 is not the minimum.
Question 78
Threshold income for the tapered annual allowance calculation excludes:
Select an option first.
Correct answer: B — Employer pension contributions
Explanation: B is correct: threshold income = adjusted income minus employer pension contributions. The purpose of excluding employer contributions is to prevent employers from manipulating the calculation by making large contributions. A, C and D are wrong — salary, bonuses and property income are included in threshold income.
Question 79
The pension money purchase annual allowance (MPAA) applies when an individual has flexibly accessed their pension and limits contributions to:
Select an option first.
Correct answer: A — £10,000 gross per year
Explanation: A is correct: the Money Purchase Annual Allowance (MPAA) is £10,000 for 2024/25 and beyond (increased from £4,000 from April 2023). Once an individual has flexibly accessed pension benefits (e.g. taken a flexible drawdown), their annual allowance for money purchase contributions is restricted to £10,000. B is wrong — £4,000 was the MPAA up to 2022/23. C is wrong — £60,000 is the standard annual allowance. D is wrong — £20,000 is not the MPAA.
Question 80
Under carry-forward rules for pension contributions, unused annual allowances can be carried forward for:
Select an option first.
Correct answer: A — Up to 3 preceding tax years
Explanation: A is correct: individuals can carry forward unused annual allowances from the 3 preceding tax years (on a FIFO basis — earliest year used first), provided they were members of a registered pension scheme in those years. A is correct. B is wrong — only 3 years, not 5. C is wrong — 3 years are available. D is wrong — unused allowances expire after 3 years.
Question 81
The income tax implications of a trust that is discretionary (as opposed to an interest in possession trust) are:
Select an option first.
Correct answer: B — Trust income is taxed at the trust rate (45% for most income, 39.35% for dividends) within the trust; distributions carry a 45% tax credit for beneficiaries
Explanation: B is correct: income arising in a discretionary trust is taxed within the trust at the rate applicable to trusts (45% for non-dividend income, 39.35% for dividends), subject to the first £1,000 at standard rates. Beneficiaries receive distributions with a 45% tax credit and may reclaim excess tax if they are non/basic rate taxpayers. A is wrong — beneficiaries are not directly assessed on undistributed income in a discretionary trust. C is wrong — 20% is too low. D is wrong — the trust is the taxable entity.
Question 82
The statutory residence test (SRT) determines UK residence based on:
Select an option first.
Correct answer: B — A set of objective tests including number of days in the UK, sufficient ties to the UK, and specific automatic UK/overseas tests
Explanation: B is correct: the SRT uses a framework of automatic overseas tests (AO tests that determine non-residence), automatic UK tests (AU tests that determine residence), and sufficient ties tests (STT) that consider family, accommodation, work, UK days and 90-day tie. B correctly describes this framework. A, C and D are wrong — passport, property and bank accounts are relevant ties but not the complete test.
Question 83
Split-year treatment under the SRT applies when:
Select an option first.
Correct answer: A — An individual is resident in the UK for part of a tax year but non-resident for the other part, and meets certain conditions
Explanation: A is correct: split-year treatment allows a year to be split into a UK part (when residence rules apply) and an overseas part (when non-residence rules apply), provided specific conditions in the SRT are met (e.g. coming to the UK part way through a year, or leaving to work overseas). A is correct. B, C and D are wrong — property, marital status and dual income are not the basis for split-year treatment.
Question 84
Anti-avoidance provisions under the transfer of assets abroad legislation:
Select an option first.
Correct answer: B — Charge income tax on a UK resident who transfers assets abroad if they or their spouse/civil partner may benefit, on the income arising to the non-resident person/company
Explanation: B is correct: the transfer of assets abroad provisions (ITA 2007 Part 13) charge income tax on a UK individual who has transferred assets to a non-UK resident entity if that individual (or their spouse) can benefit from the income. The income is assessed on the UK transferor as if they had received it. A is wrong — it applies broadly to any assets. C is wrong — income, not just capital, is affected. D is wrong — the provisions are still current.
Question 85
Under the accrued income scheme, when gilts or bonds are sold between interest payment dates, the accrued interest element is:
Select an option first.
Correct answer: B — Taxed as savings income for the seller
Explanation: B is correct: the accrued income scheme prevents the artificial conversion of income into capital. When gilts/bonds with accrued interest are transferred, the accrued interest is taxed as savings income for the transferor, and the transferee deducts an equivalent amount from the next interest receipt. A is wrong — it is not a capital gain. C is wrong — it is not exempt. D is wrong — it is savings income, not trading income.
Question 86
For income tax purposes, distributions from a UK company that are in excess of a repayment of share capital are generally:
Select an option first.
Correct answer: C — Taxed as dividend income
Explanation: C is correct: distributions from UK companies (including dividends and other distributions) are generally taxed as dividend income, subject to the dividend allowance and dividend tax rates. A is wrong — they are not capital gains (though they may reduce the capital gains base cost in some cases). B is wrong — distributions are taxable. D is wrong — they are not employment income.
Question 87
An EIS investor who has claimed EIS income tax relief can also claim CGT reinvestment relief, which:
Select an option first.
Correct answer: A — Defers any capital gain made on the disposal of another asset, by investing the gain in EIS shares
Explanation: A is correct: EIS reinvestment (deferral) relief allows an individual who has made a capital gain (on any asset) to defer all or part of that gain by investing in qualifying EIS shares. The deferred gain becomes chargeable when the EIS shares are disposed of or when the investor becomes non-UK resident. B is wrong — CGT exemption on disposal is a separate EIS relief. C is wrong — 30% is income tax relief, not an additional benefit under reinvestment. D is wrong — the base cost of EIS shares is not reduced.
Question 88
Enterprise zones and designated assisted areas may offer enhanced capital allowances. For income tax purposes, these typically allow a 100% first year allowance on:
Select an option first.
Correct answer: B — Plant and machinery in designated areas, enabling immediate full deduction
Explanation: B is correct: enhanced capital allowances (100% first year allowances) in designated areas allow businesses to deduct the full cost of qualifying plant and machinery in the year of purchase, rather than spreading relief over several years. A is wrong — 100% FYA is not available on all P&M. C is wrong — cars generally don't qualify for 100% FYA. D is wrong — buildings are not P&M.
Question 89
A property investor receives rental income from commercial premises. Finance costs (mortgage interest) on commercial properties:
Select an option first.
Correct answer: A — Are fully deductible against rental income
Explanation: A is correct: the restriction on finance costs (replacement of full deduction with a 20% tax reducer) applies only to residential property. Finance costs on commercial property remain fully deductible against commercial rental income. B is wrong — the restriction applies only to residential property. C is wrong — commercial property finance costs are fully deductible. D is wrong — no £50,000 cap.
Question 90
The highest income tax rate applicable to UK dividends for additional rate taxpayers in 2025/26 is:
Select an option first.
Correct answer: A — 39.35%
Explanation: A is correct: the additional rate for dividends is 39.35% for 2024/25 and 2025/26 (unchanged from the increase to 39.35% in 2022/23). B is wrong — 38.1% was the pre-2022 additional dividend rate. C is wrong — 33.75% is the higher rate on dividends. D is wrong — 45% is the additional rate on non-savings income.
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