You’re on a roll
Create a free account to save your ACCA progress, track your accuracy by topic, and pick up right where you left off.
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 91
An individual has trading losses brought forward of £15,000. They also have trading profits in 2024/25 of £20,000 and employment income of £30,000. Losses brought forward are:
Select an option first.
Correct answer: B — Restricted to set-off against trading profits of the same trade only — £15,000 deducted from £20,000 trading profit
Explanation: B is correct: trading losses carried forward (under s83 ITA 2007) can only be relieved against future profits of the same trade — they cannot be set against employment or other income. The £15,000 is set against the £20,000 trading profit, leaving £5,000 taxable trading profit. A is wrong — losses c/f cannot be set against total income. C is wrong — c/f losses cannot be set against capital gains directly. D is wrong — the relief is restricted to same-trade profits.
Question 92
Marginal tax planning for an individual approaching the £100,000 ANI threshold might include:
Select an option first.
Correct answer: A — Making additional pension contributions to reduce ANI below £100,000
Explanation: A is correct: the most effective planning measure for those approaching £100,000 ANI is to make additional pension contributions — gross pension contributions reduce ANI, potentially keeping it below £100,000 and preserving the full personal allowance. Gift Aid donations also work. A is correct. B is wrong — increasing salary raises ANI, worsening the position. C is wrong — ISA withdrawals are not income. D is wrong — employment expenses reduce taxable income but ANI is adjusted after most of these.
Question 93
A company pays a dividend to its individual shareholders. For income tax purposes the dividends are received:
Select an option first.
Correct answer: B — Gross — no tax is withheld at source
Explanation: B is correct: since April 2016, UK dividends are paid gross (no tax is withheld at source). The dividend allowance and applicable dividend tax rates apply in the individual's self-assessment computation. A is wrong — dividends are no longer paid net of tax. C and D are wrong — no withholding applies.
Question 94
For a sole trader, capital allowances on plant and machinery reduce:
Select an option first.
Correct answer: B — Trading profits — they are treated as allowable deductions in computing taxable trade profit
Explanation: B is correct: capital allowances on plant and machinery used in a trade are deducted from trading profits in computing the taxable profit — they replace the accounting depreciation charge which is added back as a non-allowable deduction. A is wrong — capital allowances reduce income, not capital gains. C is wrong — capital allowances on trade assets reduce trading income. D is wrong — employment income uses different rules.
Question 95
The annual investment allowance (AIA) for 2024/25 allows 100% first-year deduction on plant and machinery up to:
Select an option first.
Correct answer: A — £1,000,000 per year
Explanation: A is correct: the AIA provides 100% deduction in the year of purchase on qualifying plant and machinery up to £1,000,000 per year (made permanent from 1 April 2023). B is wrong — £200,000 was a previous limit. C and D are wrong — these were temporary levels.
Get the full ACCA question bank — free
Drop your email and we'll send you fresh ACCA practice questions, fully worked solutions and exam-deadline reminders. No spam — unsubscribe in one click.
Want to save your score and take a full mock exam? Create a free account →
Question 96
Capital allowances on cars are NOT included in the annual investment allowance. Cars are instead pooled as follows:
Select an option first.
Correct answer: B — Emissions-based: new/used zero-emission cars at 100% FYA; cars with CO2 ≤50g/km in main pool (18% WDA); cars with CO2 >50g/km in special rate pool (6% WDA)
Explanation: B is correct: for APs after 1 April 2021: new zero-emission cars qualify for 100% FYA; cars with CO2 emissions of 1–50g/km go in the main pool (18% WDA); cars with CO2 >50g/km go in the special rate pool (6% WDA). A is wrong — not all cars at 18%. C is wrong — no blanket 50% FYA for cars. D is wrong — cars do qualify for capital allowances.
Question 97
The super-deduction for companies (available 2021 to March 2023) is no longer available. Instead, from 1 April 2023, companies benefit from:
Select an option first.
Correct answer: A — Full expensing (100% first year allowance) on qualifying new main pool plant and machinery, and 50% FYA on special rate assets
Explanation: A is correct: from 1 April 2023, companies (not individuals/partnerships) benefit from 'full expensing' — 100% first year deduction on new (not second-hand) main pool P&M and 50% first year deduction on new special rate assets. This was made permanent from April 2026. B, C and D are wrong — these do not describe full expensing.
Question 98
An individual is subject to income tax on savings income at the basic rate. The tax rate applicable to savings income is:
Select an option first.
Correct answer: A — 20% (within basic rate band, above PSA)
Explanation: A is correct: savings income within the basic rate band (above the personal savings allowance and starter rate band) is taxed at the basic rate of 20%. B is wrong — 8.75% is the dividend ordinary rate. C is wrong — 0% is the savings starter rate or PSA rate. D is wrong — 40% is the higher rate.
Question 99
A self-employed individual using the cash basis must use:
Select an option first.
Correct answer: A — The cash basis for all business transactions including capital items
Explanation: A is correct: under the cash basis, all income is recognised when received and most expenditure when paid, including most capital items (which are generally deducted in full in the year paid, replacing capital allowances). However, cars are excluded from this treatment and use normal capital allowance rules. B is wrong — under cash basis, capital items (other than cars) are generally deductible in full when paid. C is wrong — this is the accruals basis. D is wrong.
Question 100
The savings income starting rate of 0% is available up to:
Select an option first.
Correct answer: A — £5,000 of savings income (where non-savings income does not exceed the personal allowance)
Explanation: A is correct: the 0% savings starting rate applies to up to £5,000 of savings income, but only where non-savings taxable income (after the personal allowance) is zero or less than £5,000. For each £1 of non-savings income above the personal allowance, the available starting rate band reduces by £1. B, C and D are wrong amounts.
Question 101
Class 1A NICs are payable by employers on:
Select an option first.
Correct answer: B — Taxable benefits in kind provided to employees (e.g. company cars, private medical insurance)
Explanation: B is correct: Class 1A NICs are paid by employers at 13.8% (2024/25 rate, increasing to 15% in 2025/26) on the cash equivalent of taxable benefits in kind provided to employees. They are NOT paid by employees. A is wrong — wages attract Class 1 NICs. C is wrong — self-employed pay Class 4. D is wrong — dividends are not earnings.
Question 102
Class 1B NICs are payable by employers in connection with:
Select an option first.
Correct answer: A — PAYE Settlement Agreements (PSAs) — on items included in the PSA
Explanation: A is correct: Class 1B NICs are paid by employers at the employer NIC rate on the total value of items included in a PAYE Settlement Agreement (PSA) plus the income tax payable under the PSA. A is correct. B is wrong — Class 1A applies to benefits in kind. C is wrong — pension contributions do not attract Class 1B. D is wrong — share schemes may attract Class 1 on exercise.
Question 103
The relief for job-related accommodation means that the benefit of accommodation provided to an employee is exempt if:
Select an option first.
Correct answer: B — The employee is required to live in the accommodation for the proper performance of their duties OR it is customary to live there AND necessary for better performance
Explanation: B is correct: the job-related accommodation exemption applies where: (a) living in the accommodation is necessary for the proper performance of the duties; or (b) it is customary for employees in that type of employment to live in accommodation AND it is better performance of duties. B correctly captures both limbs. A is wrong — employer ownership is a condition for the accommodation to be a benefit, not for exemption. C is wrong — location is irrelevant. D is wrong — salary level is not the test.
Question 104
Under the employment-related securities rules, restricted shares granted to an employee at below market value are taxed:
Select an option first.
Correct answer: A — At the time of grant, on the difference between cost and unrestricted market value (UMV), with an election to apply to the actual market value instead
Explanation: A is correct: employment-related securities (ERS) rules under ITEPA 2003 generally charge income tax on the employment income benefit arising when shares are acquired below UMV. An election can be made to be taxed on the actual (restricted) market value at grant, with the remaining gain being subject to CGT on disposal. A correctly describes the framework. B is wrong — grant date is typically when the income charge arises. C is wrong — dividends are separate. D is wrong — it is income tax, not CGT, at grant.
Question 105
The employee shareholder status (ESS) shares scheme was abolished. Prior to abolition, ESS shares were attractive because:
Select an option first.
Correct answer: B — Up to £50,000 of ESS shares were exempt from CGT on disposal and income tax on acquisition
Explanation: B is correct: ESS shares (before abolition) gave CGT exemption on gains up to £50,000 and income tax exemption on the first £2,000 of shares. B captures the key CGT benefit. A is wrong — ESS did not exempt all employment income. C and D are wrong.
Question 106
Under the rules for disguised remuneration (Part 7A ITEPA 2003), a third-party arrangement that provides a loan or asset to an employee in return for their services is treated as:
Select an option first.
Correct answer: B — Employment income subject to income tax and NICs at the time the benefit is made available
Explanation: B is correct: disguised remuneration rules (ITEPA 2003 Part 7A) treat arrangements where third parties provide loans or assets to employees (typically via trusts or offshore entities) as employment income subject to income tax and NICs when the relevant step occurs. B is correct. A is wrong — it is employment income. C is wrong — repayability does not avoid the charge under Part 7A. D is wrong — not dividend income.
Question 107
A partnership has two partners (A and B) sharing profits 60:40. The partnership income from property is £30,000. Each partner's share for income tax is:
Select an option first.
Correct answer: A — A: £18,000; B: £12,000 — assessed individually as property income
Explanation: A is correct: partnership income (including property income) is assessed on each partner individually in proportion to their profit-sharing ratio. A's share = 60% × £30,000 = £18,000; B's share = 40% × £30,000 = £12,000. Each pays income tax on their own share. A is correct. B is wrong — equal split applies only where there is an equal profit-sharing agreement. C is wrong — both partners are assessed. D is wrong — tax is individual.
Question 108
An individual earns £200,000 salary in 2024/25. Their income tax for the year (ignoring pension contributions and other deductions) includes which feature?
Select an option first.
Correct answer: B — Personal allowance is reduced to nil (since ANI > £125,140); income up to £125,140 at 40%, above at 45%
Explanation: B is correct: with ANI of £200,000, the personal allowance is fully withdrawn (nil). The first £37,700 of taxable income is at 20% (basic rate); income £37,701 to £125,140 at 40% (higher rate); income above £125,140 at 45% (additional rate). B correctly states the key features. A is wrong — PA is nil. C is wrong — tapering does apply above £100,000. D is wrong — additional rate also applies.
Question 109
The cash equivalent of a private use fuel benefit for 2024/25 is:
Select an option first.
Correct answer: A — £27,800 (the fuel benefit charge multiplied by the same appropriate percentage as the car)
Explanation: A is correct: the fuel benefit is £27,800 (for 2024/25) multiplied by the same appropriate percentage used for the car benefit calculation. So a car with an appropriate percentage of 30% would have a fuel benefit of £27,800 × 30% = £8,340. A correctly describes the calculation. B is wrong — it is not a flat amount. C is wrong — the appropriate percentage varies by CO2 emissions. D is wrong — it is based on £27,800 × appropriate %, not list price × 10%.
Question 110
For income tax purposes, a lease premium received by a landlord granting a 25-year lease is partly treated as:
Select an option first.
Correct answer: C — A property income receipt for: Premium × (1 − (2% × (n−1))) where n = lease term in years
Explanation: C is correct: where a landlord receives a premium on granting a lease of 50 years or less, the portion treated as property income = Premium × [1 − 2% × (n−1)] where n = lease term in years. For a 25-year lease: Premium × [1 − 2% × 24] = Premium × (1 − 48%) = 52% of premium is property income. The balance (48%) is treated as a capital receipt. C correctly states the formula. A is wrong — not 100% capital. B is wrong — the formula is year-based. D is wrong — not equal split.
Question 111
An individual sells shares in an EIS company after 2 years. The EIS income tax relief given (30%) is:
Select an option first.
Correct answer: B — Withdrawn (clawed back) — the shares must be held for at least 3 years
Explanation: B is correct: EIS shares must be held for at least 3 years for the income tax relief to be retained. If disposed of within 3 years (other than on death), the relief is withdrawn. B is correct. A is wrong — 3 years, not 2, is required. C is wrong — full withdrawal, not 50%. D is wrong — cessation of trading is a separate disqualifying event.
Question 112
Income from furnished holiday lettings (FHL) was treated as trading income (before abolition). One key consequence was:
Select an option first.
Correct answer: B — FHL profits could be averaged across years and used for pension contribution purposes as earned income
Explanation: B is correct: a key benefit of the FHL regime was that profits counted as earned income (relevant UK earnings) for pension purposes, enabling larger pension contributions. B is correct. A is wrong — normal income tax rates applied. C is wrong — capital allowances were available on FHL assets. D is wrong — VAT rules for FHL were separate and complex.
Question 113
The personal allowance for 2024/25 is reduced for adjusted net income above £100,000. 'Adjusted net income' includes which of the following?
Select an option first.
Correct answer: A — Net income minus gross Gift Aid donations minus gross personal pension contributions
Explanation: A is correct: adjusted net income is calculated as: net income (total income less reliefs such as trading losses, loan interest etc.) minus grossed-up Gift Aid donations minus grossed-up personal pension contributions. A correctly describes the calculation. B is wrong — Gift Aid and pension deductions reduce ANI. C is wrong — total income before deductions is not ANI. D is wrong — pension contributions also reduce ANI.
Question 114
A qualifying loan interest deduction for income tax is available where an individual borrows money to invest in:
Select an option first.
Correct answer: B — A close company in which the borrower has a material interest (or is an employee/director), or a qualifying partnership/cooperative
Explanation: B is correct: qualifying loan interest relief (ITA 2007 s383) is available for interest on loans used to: invest in a close company where the borrower has a material interest or is an employee/director; invest in a partnership as a working partner; purchase plant and machinery for use in employment or partnership. B captures the close company route. A is wrong — any company is too broad. C is wrong — ISA interest is separate. D is wrong — quoted shares do not qualify.
Question 115
The income tax treatment of a lump sum redundancy payment is:
Select an option first.
Correct answer: B — First £30,000 is exempt; excess over £30,000 is subject to income tax (and employer Class 1A NICs)
Explanation: B is correct: statutory and contractual redundancy payments are exempt from income tax up to £30,000. The excess over £30,000 is subject to income tax (and employer Class 1A NICs from 6 April 2020 on the excess over £30,000). B is correct. A is wrong — the first £30,000 is exempt. C is wrong — not fully exempt. D is wrong — it is income tax, not CGT.
Question 116
Under the income tax rules for trusts, a bare trust is treated as:
Select an option first.
Correct answer: B — Transparent — the beneficiary is treated as the direct owner of the trust assets and is assessed directly on income and gains
Explanation: B is correct: a bare trust (nominee arrangement) is transparent for tax purposes — the beneficiary is treated as if they own the underlying assets directly. Income and gains are assessed on the beneficiary. B is correct. A is wrong — bare trusts are not separate taxable entities. C is wrong — 45% is the rate for discretionary trusts. D is wrong — bare trusts are not discretionary.
Question 117
An interest in possession trust is one where the beneficiary:
Select an option first.
Correct answer: B — Has a present right to the income of the trust as it arises — they are assessed on the trust income
Explanation: B is correct: in an interest in possession (IIP) trust, the life tenant has a present, fixed right to receive the income of the trust — they are assessed to income tax on the trust's income. B is correct. A is wrong — discretionary rights describe a discretionary trust. C is wrong — the life tenant's interest is in income. D is wrong — a future interest would be a reversionary interest.
Question 118
For the making tax digital (MTD) for income tax self-assessment, the first wave of mandation (from April 2026) affects:
Select an option first.
Correct answer: B — Self-employed individuals and landlords with qualifying income (gross trading and/or property) above £50,000 based on their 2024/25 tax return
Explanation: B is correct: MTD for ITSA will be mandated from April 2026 for those with qualifying income (gross self-employment and/or rental income) above £50,000 (based on their 2024/25 return). B is correct. A is wrong — only those above the threshold are mandated first. C is wrong — PAYE taxpayers are not in the first wave. D is wrong — savings income is not qualifying income for this threshold.
Question 119
A UK individual receives foreign employment income of £40,000 from working in a treaty country. The relevant double tax treaty provides for exemption from UK tax on income taxed in the treaty country. The UK treatment is:
Select an option first.
Correct answer: B — The income may be exempt from UK tax under the treaty (typically via the exemption method or the credit method depending on the treaty terms)
Explanation: B is correct: double tax treaties override domestic law to prevent double taxation. Depending on the treaty terms, the income may be exempt in the UK or a credit may be given for foreign tax paid. B correctly identifies the treaty-based approach. A is wrong — treaties modify the UK charge. C is wrong — the rate depends on the individual's marginal rate unless the treaty provides otherwise. D is wrong — disclosure may be required.
Question 120
The remittance of foreign income to the UK by a non-domiciled individual using the remittance basis includes:
Select an option first.
Correct answer: B — Broadly any benefit that the individual enjoys in the UK from their foreign income or gains — including paying UK expenses from a foreign bank account, importing assets or making gifts to family members in the UK using foreign income
Explanation: B is correct: the definition of remittance is broad — it includes any arrangement where the individual (or their close family) enjoys a benefit in the UK that is derived from their foreign income or gains. B correctly captures this breadth. A is wrong — cash transfers are just one example. C is wrong — bank transfers are just one method. D is wrong — all types of foreign income are included.
More free ACCA topics
Management Accounting401
Financial Accounting400
Corporate and Business Law400
Performance Management400
Financial Reporting400
Financial Management400
Strategic Business Reporting400
Advanced Financial Management400
Advanced Performance Management400
Business and Technology300
Taxation300
Audit and Assurance300
Strategic Business Leader300
Advanced Audit and Assurance296
Ten questions in
- The ones you miss are saved as a drill you can repeat
- Your place is kept, on this device and any other
- A streak, if that is the thing that gets you back tomorrow
Every question on this page stays free and open either way.