Relevant to Foundations in Taxation – United Kingdom (FTX–UK) – June and December 2024 sittings
This appendix outlines the effects of the changes made in the Finance Act 2023 on FTX-UK. The sub-headings refer to the headings in the main Finance Act 2023 article on TX-UK.
The Finance (No. 2) Act 2023 did not receive Royal Assent by the exam cut-off date of 31 May 2023, and is therefore not examinable as regards exams falling in the period 1 June 2024 to 31 March 2025.
The same thresholds and the rates of tax shown will also be used in FTX-UK.
The personal allowance will be examined in a similar way to TX-UK. Both the withdrawal of the allowance - where income exceeds £100,000 - and the impact of personal pension contributions and gift aid donations on the calculation of adjusted net income will be examinable. The rules regarding the transfer of some of the personal allowance to a spouse or civil partner will not be examined and therefore the transferable amount will not be given in the FTX-UK rates and allowances.
FTX-UK will examine savings income in a similar way to TX-UK; however tax planning remains outside of the FTX-UK syllabus, therefore the impact of transferring savings income to a spouse or a civil partner will not be examined.
The savings income nil rate bands will be given in the FTX-UK tax rates and allowances.
FTX-UK will examine dividends in a similar way to TX-UK; however tax planning between spouses, civil partners and the impact on the decision to incorporate or extract funds from a company will not be examined.
The dividend nil rate band will be given in the FTX-UK tax rates and allowances.
FTX-UK will examine the same detail as shown for TX-UK.
Electric and hybrid-electric cars are examinable and therefore all of the following will be examinable in FTX-UK:
The same car benefit percentage detail will be given in the FTX-UK rates and allowances as that given in TX-UK.
Company van and fuel benefits will continue to be examinable in FTX-UK and the scale charges will be included in the FTX-UK tax rates and allowances. Zero emission vans will, however, not be examined and the scale charges will not be shown in the tax rates and allowances table.
FTX-UK will examine this in a similar way as that in TX-UK.
The official rate of 2.25% will be used in both of the 2024 examinations.
FTX-UK will examine this in a similar way to TX-UK.
For the 2024 examinations, the transitional rules applicable to the tax year 2023/24 and the new tax year basis applicable from the tax year 2024/25 onwards are not examinable. This means that for the June and December 2024 exams, an unincorporated business will always have an accounting period ending on 5 April (or 31 March) if the basis of assessment is in point.
The current year basis opening and closing year rules, and the overlap profits, are no longer examinable.
FTX-UK will examine the current annual investment allowance limit of £1,000,000 in the 2024 examinations.
The structures and buildings allowance (SBA) of 3% will be examined in the 2024 examinations in the same way as they are for TX-UK. This will include future disposals of qualifying structures and buildings and the effect of the allowances claimed on the capital gain calculation.
The rates and allowances section for FTX-UK will show the same detail as that shown for TX-UK.
The rules regarding finance costs of residential property remain outside the FTX – UK syllabus.
Detailed knowledge of these remains outside the syllabus for FTX-UK but knowledge of income from these accounts being non-taxable is examinable.
The new rates and thresholds will apply to FTX-UK and the same detail will be given in the rates and allowances as that given for TX-UK.
The threshold of £5,000 will be examined in FTX-UK.
Awareness of the annual allowance limit is required. The annual allowance for the tax year 2023/24 is unchanged at £40,000.
The additional tax charges for excess contributions continue not to be examinable.
The method of obtaining tax relief for contributions to both occupational and personal schemes remains examinable.
The carry forward provisions for the annual allowance will continue not to be examinable in FTX-UK, therefore only the annual allowance limit of £40,000 will be shown in the tax rates and allowances section.
The rules regarding the tapered annual allowance are not examinable.
The lifetime allowance for the tax year 2023/24 is unchanged at £1,073,100.
For the tax year 2023/24, the annual exempt amount has been reduced from £12,300 to £6,000, therefore the annual exempt amount of £6,000 will be used in FTX-UK.
The rates of capital gains tax will be examined in FTX-UK in a similar way to that used in TX-UK.
No capital gains tax questions will be set which involve the effects of pension contributions and gift aid payments on the income tax thresholds.
The rate of tax of 10% and the £1 million lifetime limit remain required knowledge for FTX-UK.
This relief remains outside of the FTX-UK syllabus.
The rates and allowances section for FTX-UK will show the same detail (with the exception of the detail on investors’ relief) for capital gains tax as that shown for TX-UK.
This remains outside the syllabus for FTX-UK.
FTX-UK will examine this in a similar way as TX-UK.
For the financial years 2021 and 2022, the rate of corporation tax was 19%. This single rate applied regardless of the level of a company’s profits.
For the financial year 2023, there are two rates of corporation tax:
The lower and upper limits are proportionately reduced for short accounting periods and also according to the number of associated companies.
Marginal relief eases the transition from the small profits rate to the main rate of corporation tax where augmented profits fall between £50,000 and £250,000.
Corporation tax is calculated at the main rate of 25%, with this figure then reduced by marginal relief. The formula for calculating marginal relief is:
The standard fraction for the financial year 2023 is 3/200.
Accounting periods that span two financial years if there is a change in the rate of tax will not be examined in FTX-UK.
FTX-UK will examine this in a similar way as TX-UK.
The effect of dividends received on determining whether corporation tax is payable by instalments continues not to be examinable for FTX-UK.
The effect of associated companies on the profit threshold is not examinable for FTX-UK.
Enhanced capital allowances are no longer available from 1 April 2023, with the two-year qualifying period having ended on 31 March 2023. Therefore, similarly to TX-UK, a question will no longer be set involving an initial claim for enhanced capital allowances.
However, a disposal of plant and machinery on which enhanced capital allowances (including the 130% super deduction) have been claimed could be examined, in a similar way as for TX-UK.
The calculation of these remains outside of the FTX-UK syllabus.
The unchanged registration and deregistration limits will also be used in both the 2024 examinations for FTX-UK.
The unchanged standard rate of 20% will be used in FTX-UK.
Written by a member of the FTX-UK examining team