17 Toby is a sole trader.

Which of the following actions by Toby is not an example of tax evasion?

A Claiming £2,000 of personal expenses through the business
B Understating cash sales by £500
C Deliberately postponing the sale of some shares from 5 April until 6 April so that he
can use the following year’s annual exempt amount to reduce his capital gains tax
D Overestimating the value of some property donated to charity LO 1h

ICAEW 2019 Chapter 1: Ethics 7

8 Principles of Taxation: Question Bank ICAEW 2019
Chapter 2: Introduction to taxation
1 Which of the following items is never a source of UK tax law?
A The annual Finance Act
B HMRC statements of practice
C Case law
D Statutory instruments LO 1f

2 Pauline used to earn £20,000 and paid £3,000 in income tax per annum. She has recently
received a substantial pay rise and now earns £50,000. Her revised income tax is £10,000.
What is the principle on which this tax system is based?
A Progressive taxation
B Regressive taxation
National insurance contributions is an example of
C direct taxation
D indirect taxation LO 1b

3 One argument proposed in debates about taxation, is that the cost of collecting tax should
be low in relation to the tax raised.
The principle behind this argument is the
A ability to pay principle
B efficiency principle
VAT is an example of
C direct taxation
D indirect taxation LO 1b

4 A government is considering abolishing the current VAT rules on all food bought in
supermarkets (but not any other shop) and replacing it with the following form of taxation.
Each item bought in the supermarket will be subject to a levy of £0.75. In other words a
person who purchases 10 items of any value will pay £7.50 in tax.
The principle behind the proposed system is the
A ability to pay principle
B value principle
C unit principle
D neutrality principle LO 1b

ICAEW 2019 Chapter 2: Introduction to taxation 9

 5 Which of the following is a source of tax law?
A The Budget
B Statutory instruments
C HMRC extra-statutory concessions
D HMRC statements of practice LO 1f

6 Diana is an individual who does not have a trade or business of any kind. Diana is an
employee earning £30,000 per year and a shareholder in Firm Ltd. Diana has heard that the
following taxes exist in the UK and is unsure which of them she pays personally:
(1) Capital gains tax
(2) Corporation tax
(3) Income tax
(4) National insurance contributions
(5) Value added tax
Which of the following options correctly identifies which taxes Diana could or does suffer
personally?
A All of them
B (1), (3) and (4) only
C (1), (3), (4) and (5) only
D (1), (2), (3) and (4) only LO 1e

7 John and David operate a VAT-registered partnership, employing a large number of staff.
Which of the following options correctly identifies which taxes the partners are jointly and
severally liable for?
(1) Income tax on each partner's share of profits from the partnership
(2) Income tax of employees deducted under the Pay As You Earn (PAYE) system
(3) Employer and employee national insurance contributions payable in respect of their
staff
(4) Capital gains tax on each partner's share of partnership gains
(5) VAT as a supplier of goods

A All of them
B (1), (2) and (3) only
C (2), (3) and (5) only
D (1), (2), (3) and (5) only LO 1e

10 Principles of Taxation: Question Bank ICAEW 2019

 8 Which of the following are functions carried out by HMRC?
(1) Collect and administer direct taxes
(2) Collect and administer indirect taxes
(3) Pay and administer child support payments
(4) Collect repayments of student loans
(5) Pay and administer the state pension

A (1) and (2) only

B (1), (2) and (3) only
C (1), (2) and (4) only
D (1), (2), (3) and (5) only LO 1e

9 Which of the following options is correct regarding case law, as determined by tax cases in
court?
A Case law is purely for guidance when interpreting statutory law.
B Case law applies for the 12 months following the date of the particular court case.
C Case law can be superseded by further statutory legislation.
D Case law sets a precedent meaning the law can never be changed. LO 1f

10 Which of the following options correctly describes a statutory instrument?

A Published by HMRC primarily for the guidance of its own staff
B Sets out HMRC's interpretation of tax legislation
C Provides a relaxation of the strict legal position of tax legislation
D Tax legislation, commonly in the form of Regulations, containing detailed provisions
LO 1f

ICAEW 2019 Chapter 2: Introduction to taxation 11

12 Principles of Taxation: Question Bank ICAEW 2019
Chapter 3: Introduction to income tax
1 Patrick has net income for 2018/19 is £117,750.
What is his personal allowance for 2018/19? £
You may enter your answer as a positive or negative number LO 3b

2 In 2018/19, Mackenzie has taxable income (after deducting the personal allowance) of
£25,565 (non-savings income) and £1,100 (savings income).
What is Mackenzie's total income tax liability for 2018/19? £ LO 3j

3 William, now aged 85, married Grainne, now aged 73, on 10 December 2005. In 2018/19
William received income from his pension of £7,000. For many years Grainne has run a
small shop and her business has made adjusted trading profits of £18,000 for 2018/19. The
couple have no other sources of income.
The married couples allowance due to the couple for 2018/19 will initially be
A given to William
B given to Grainne
C shared between them equally
The allowance due to the couple to give relief at 10% is
D £870
E £11,850
F £8,695 LO 3b

4 During 2018/19 Kael had taxable income (after deduction of the personal allowance) of
£35,530 (non-savings income) and £6,200 (dividend income). Tax of £6,805 has been
deducted from Kael's non-savings income. He also paid £720 as a Gift Aid donation to his
son's school (a registered charity).
What is Kael's income tax payable by self assessment for 2018/19?
A £1,692
B £1,872
C £2,342
D £8,497 LO 3j

5 In 2018/19, Paloma has taxable income (after deduction of the personal allowance) of
£88,500 (all dividend income).
What is Paloma's income tax liability for 2018/19?
A £27,400
B £20,138
C £19,988
D £16,137 LO 3j

ICAEW 2019 Chapter 3: Introduction to income tax 13

 6 On 20 May 2018 Charlie, aged 73, married Sarah, aged 84. In 2018/19 Charlie and Sarah
had net income of £15,000 and £12,000 respectively.
How much married couple's allowance can Charlie claim as a tax reducer for 2018/19?
A £870
B £797
C £725
D £435 LO 3b

7 In 2018/19, Glenn has taxable income (after deducting the personal allowance) of £33,500
(non-savings income) and £2,300 (dividend income).

What is Glenn's total income tax liability for 2018/19? £ LO 3j

8 In 2018/19 Mabel had taxable income (after deducting the personal allowance) of £39,000,
all of which represented savings income. She paid £1,056 as a Gift Aid donation to the
NSPCC (a registered charity).
What is Mabel's income tax liability for 2018/19? £ LO 3j

9 During 2018/19 Jacob gave a cash donation of £2,000 to a registered charity. His only
income is an annual salary of £50,000.
Identify how Jacob obtains tax relief for his gift.
He receives basic rate tax relief
A at source by deduction from his salary under payroll giving
B at source by paying net of basic rate income tax
C by extending the basic rate band
He receives higher rate tax relief
D at source by deduction from his salary under payroll giving
E at source by paying net of basic rate income tax
F by extending the basic rate band LO 3j

10 Puneet's only source of income in 2018/19 is a salary of £102,730.

What is his personal allowance for 2018/19?
A £11,850
B £10,485
C £9,120
D £1,365 LO 3b

14 Principles of Taxation: Question Bank ICAEW 2019

 11 In 2018/19, Pierre had taxable non-savings income (after deducting the personal allowance)
of £3,000, £2,800 of savings income and £1,500 of dividend income.
What is his income tax liability for 2018/19?
A £660
B £760
C £600
D £960 LO 3j

12 Margaret is self-employed and has taxable trading profits (after deduction of the personal
allowance) of £34,000 in 2018/19. During 2018/19 Margaret also received dividend income
of £9,000.
How much of Margaret's dividend income is subject to tax at 32.5% in 2018/19?
A £6,500
B £7,000
C £8,500
D £9,000 LO 3j

13 Maalik is employed by Artichoke Ltd and has taxable income in 2018/19 of £20,000 (after
deduction of the personal allowance). On 1 December 2018 Maalik paid £420 to a charity
under the Gift Aid provisions.
In 2018/19 the Gift Aid payment will
A increase Maalik's income tax liability
B decrease Maalik's income tax liability
C have no impact on Maalik's income tax liability
D generate a refund of income tax payable to Maalik LO 3j

14 In 2018/19, Bussola has taxable non-savings income (after deduction of the personal
allowance) of £210. During 2018/19 she also received taxable savings income of £38,100.
What is Bussola's income tax liability for 2018/19? £ LO 3j

15 Manav has taxable income (after deduction of the personal allowance) in 2018/19 of:
Non-savings income £17,015
Savings income £1,800
What is Manav's income tax liability for 2018/19? £ LO 3j

ICAEW 2019 Chapter 3: Introduction to income tax 15

 16 Frederick works as an employee of Wood Ltd. Frederick's only source of income is
employment income. Frederick's taxable income (after deduction of the personal
allowance) for 2018/19 was £15,815. During 2018/19 Frederick paid £3,100 in income tax
via PAYE.
What is Frederick's income tax payable under self-assessment for 2018/19? £

LO 3j

17 Sidney and Bertha were married in February 2007. Sidney is now aged 70 and Bertha is
now aged 86. For 2018/19 Sidney has net income of £6,788 and Bertha has net income of
£13,456.
What is Sidney's married couple's allowance for 2018/19?
A £0 – Allocated to Bertha
B £11,850
C £8,695
D £3,360 LO 3b

18 Darcy is self employed and has trading profits assessable in 2018/19 of £198,000.
What is Darcy's personal allowance for 2018/19? £

You may enter your answer as a positive or negative number LO 3b

19 Dave has taxable income in 2018/19 of £133,000 (non-savings income), £27,600 (savings
income) and £15,000 (dividend income).
What is Dave's income tax liability for 2018/19?
A £58,308
B £63,585
C £63,720
D £62,823 LO 3j

20 Diane is self employed and has trading profits assessable in 2018/19 of £118,000.
What is Diane's personal allowance for 2018/19? £

You may enter your answer as a positive or negative number LO 3b

21 Sandra has rental profits assessable in 2018/19 of £128,000.

What is Sandra's personal allowance for 2018/19? £

You may enter your answer as a positive or negative number LO 3b

16 Principles of Taxation: Question Bank ICAEW 2019

 22 Geoff had taxable income (after deduction of his personal allowance) of £14,450 of non-
savings income in 2018/19. His wife, Jessica, had no income during 2018/19. Jessica made
a marriage allowance election in 2018/19.
What is Geoff's income tax liability for 2018/19? £ LO 3j

23 During 2018/19 Leanne was a higher rate taxpayer (net income of £80,000) but her
husband Richard stayed at home to look after their children, and had no income in 2018/19.
Both Leanne and Richard are aged 40.
Which of the following statements about the personal allowance is true?
A Leanne's personal allowance is reduced because her income exceeds the basic rate
band.
B An election can be made to transfer all of Richard's personal allowance to Leanne.
C An election can be made to transfer £1,190 of Richard's personal allowance to Leanne.
D No election can be made to transfer any part of Richard's personal allowance to
Leanne. LO 3b

24 Sarah who was born in 1938, has net income in 2018/19 of £29,900. She married Arthur,
who was born in 1931, in March 2010. Arthur has net income for 2018/19 of £15,000.
What is Sarah's married couple's allowance for 2018/19 on which 10% tax relief is given?
£ LO 3b

25 Shelia who was born in 1936, has net income in 2018/19 of £40,200. She married Archie,
who was born in 1932, in January 2007. Archie has net income for 2018/19 of £12,000.
What is Shelia's married couple's allowance for 2018/19 on which 10% tax relief is given?
£ LO 3b

ICAEW 2019 Chapter 3: Introduction to income tax 17

18 Principles of Taxation: Question Bank ICAEW 2019
Chapter 4: Employment income
1 Emily is an employee of Door Ltd with a gross annual salary of £26,000. In addition Emily
has taxable benefits worth £4,558. Emily underpaid her tax for 2016/17 by £246. Emily has
agreed with HMRC that this underpayment will be collected via her PAYE code for 2018/19.
What is Emily's PAYE code for 2018/19?
A 606L
B 704L
C 729L
D 1185L LO 2b

2 Mustafa is an employee of Window Ltd with a gross annual salary of £17,000. Mustafa
underpaid his tax for 2016/17 by £910. Mustafa has agreed with HMRC that this
underpayment will be collected via his PAYE code for 2018/19.
What is Mustafa's PAYE code for 2018/19?
A 730L
B 957L
C 1094L
D 1185L LO 2b

3 Parminder is an employee of Sales Ltd with a gross annual salary of £50,000. Parminder also
has taxable benefits worth £17,900 for 2018/19.
What is Parminder's PAYE code for 2018/19?

PAYE code LO 2b

4 James earns £60,000 a year. He is entitled to a basic personal allowance. His employer
provides him with a company car with a taxable benefit of £13,125.
What is James' PAYE code for 2018/19?
A K126
B K127
C K128
D 127L LO 2b

5 Jacob earns £15,000 a year. His employer provides him with taxable benefits of £4,910.

What is Jacob's PAYE code for 2018/19? L LO 2b

ICAEW 2019 Chapter 4: Employment income 19

 6 Dana has total income of £50,000 each year. She has underpaid tax of £1,372 in 2016/17
which is recovered through her PAYE code in 2018/19.
What is Dana's PAYE code for 2018/19?
A 499L
B 842L
C 1047L
D 1185L LO 2b

20 Principles of Taxation: Question Bank ICAEW 2019