Income Tax: A Comprehensive Guide for University Students

Question 1

In the UK, corporation tax is calculated as a percentage of a company's:

Accepted Answer

Taxable profits

Answer

Revenue

Answer

Gross profit

Answer

Net income

Question 2

Which of the following tax avoidance strategies is considered illegal in the United Kingdom?

Accepted Answer

Tax evasion

Answer

Offshore tax havens

Answer

Aggressive tax planning

Answer

Tax loopholes

Question 3

Which of the following expenses is not deductible when calculating taxable income for individuals in the UK?

Accepted Answer

Medical expenses

Answer

Mortgage interest payments

Answer

Charitable donations

Answer

Pension contributions

Question 4

What is the basic rate of income tax for individuals in the UK for the 2023/24 tax year?

Accepted Answer

20%

Answer

19%

Answer

25%

Answer

30%

Question 5

Which of the following is not a type of employment income in the UK?

Accepted Answer

Dividends

Answer

Salaries and wages

Answer

Bonuses

Answer

Self-employment profits

Question 6

What is the main purpose of the Personal Allowance in the UK income tax system?

Accepted Answer

To provide a tax-free allowance for individuals

Answer

To reduce the amount of income that is taxable

Answer

To encourage individuals to save for retirement

Answer

To offset any losses incurred during the tax year

Question 7

What is the main difference between the accruals basis and the cash basis of accounting for income tax purposes in the UK?

Accepted Answer

The accruals basis records income when it is earned, regardless of when it is received

Answer

The cash basis records expenses when they are incurred, regardless of when they are paid

Answer

The accruals basis is used for corporation tax, while the cash basis is used for personal income tax

Answer

There is no difference between the two bases of accounting for income tax purposes

Question 8

Which of the following is a CORRECT statement about capital gains tax?

Accepted Answer

Entrepreneurs' Relief can potentially reduce the capital gains tax payable when selling a business.

Answer

Capital gains tax is levied on all profits made from the sale of assets.

Answer

The capital gains tax rate is uniform for all taxpayers.

Answer

The straight-line method is the exclusive method for calculating capital gains tax.

Question 9

What is the key difference between a personal tax allowance and a business tax allowance?

Accepted Answer

A personal allowance is for individuals, while a business allowance is for companies.

Answer

A business allowance is for individuals, while a personal allowance is for companies.

Answer

Personal and business tax allowances have the same purpose.

Question 10

How is corporation tax calculated in the UK?

Accepted Answer

As a percentage of net profits

Answer

As a percentage of turnover

Answer

As a fixed amount based on company size

Answer

Based on a combination of profits, turnover, and dividends

Question 11

What is the type of tax levied on gains made from the disposal of assets in the UK?

Accepted Answer

Capital gains tax

Answer

Income tax

Answer

Corporation tax

Answer

Inheritance tax

Question 12

Identify the primary distinction between income tax and corporation tax.

Accepted Answer

Income tax applies to individuals while corporation tax applies to businesses

Answer

Income tax rates vary based on income level while corporation tax rates remain constant

Answer

Income tax calculations use cash accounting while corporation tax calculations use accrual accounting

Answer

Income tax is considered a direct tax while corporation tax is considered an indirect tax

Question 13

Which of the following expenses is NOT deductible when calculating taxable profits for a business?

Accepted Answer

Personal expenses of the owner

Answer

Advertising and marketing

Answer

Salaries and wages

Answer

Interest on loans

Question 14

Which of the following is an example of an indirect tax?

Accepted Answer

Value-added tax (VAT)

Answer

Income tax

Answer

Corporation tax

Answer

Capital gains tax

Question 15

Which of the following is NOT a qualifying personal allowance?

Accepted Answer

Trading Allowance

Answer

Personal Allowance

Answer

Marriage Allowance

Answer

Blind Person's Allowance

Question 16

Which of the following is a type of tax levied on companies?

Accepted Answer

Corporation Tax

Answer

Income Tax

Answer

Capital Gains Tax

Answer

Value Added Tax

Question 17

How does income tax affect different types of income in the UK?

Accepted Answer

The impact of income tax varies depending on the type of income.

Answer

Income tax only applies to income earned from employment.

Answer

Property income is always taxed at a higher rate than employment income.

Answer

Business profits are not subject to income tax.

Question 18

Which of the following is NOT a type of personal allowance within the UK tax system?

Accepted Answer

Corporation tax allowance

Answer

Personal allowance

Answer

Marriage allowance

Answer

Blind person's allowance

Question 19

Within the UK, who bears the responsibility for paying income tax?

Accepted Answer

Individuals and businesses with taxable income

Answer

Individuals solely with income from employment

Answer

Non-residents solely with income sourced from the UK

Answer

Businesses solely with profits

Question 20

In the UK tax system, what is a personal allowance?

Accepted Answer

Non-taxable portion of income

Answer

Allowance applicable to business expenses

Answer

Reduced tax rate for specific individuals

Answer

Complete exemption from paying tax

Question 21

Distinguish between income tax and corporation tax. Explain the fundamental difference.

Accepted Answer

Income tax is levied on individual income, while corporation tax is levied on business profits.

Answer

Income tax is levied on capital gains, while corporation tax is levied on income.

Answer

Income tax is paid only by individuals, while corporation tax is paid only by businesses.

Question 22

Explain the concept of self-assessment in the UK income tax system.

Accepted Answer

Individuals and businesses independently calculate and submit their own tax returns.

Answer

Tax is automatically deducted from salaries and wages.

Answer

Tax is paid in installments throughout the year.

Question 23

Which of the following is NOT an allowable deduction for income tax calculation in the UK?

Accepted Answer

Personal expenses

Answer

Interest on business loans

Answer

Travel expenses incurred for business purposes

Answer

Business expenses incurred wholly and exclusively for the purpose of the trade

Question 24

What is the primary role of Her Majesty's Revenue and Customs (HMRC) in the UK tax system?

Accepted Answer

Collects and manages taxes

Answer

Sets tax rates

Answer

Provides tax advice

Question 25

Which of the following is an example of a progressive tax system?

Accepted Answer

Income tax

Answer

Sales tax

Answer

Flat tax

Question 26

What is the primary purpose of income tax?

Accepted Answer

To raise revenue for public services

Answer

To punish individuals for earning income

Answer

To control inflation

Answer

To redistribute wealth

Question 27

Which of the following is NOT a type of income tax levied in the UK?

Accepted Answer

Sales tax

Answer

Capital gains tax

Answer

Income tax

Answer

Corporation tax

Question 28

Which of the following tax systems is considered progressive, meaning higher earners pay a larger proportion of their income in tax?

Accepted Answer

Income tax

Answer

Property tax

Answer

Flat tax

Answer

Sales tax

Question 29

What is the primary purpose of corporation tax in the UK?

Accepted Answer

To generate revenue from businesses

Answer

To promote economic growth

Answer

To reduce income inequality

Answer

To fund social welfare programs

Question 30

Which of the following scenarios describes a capital gain?

Accepted Answer

Profit made from selling an asset that has increased in value

Answer

Dividends received from shares

Answer

Income from employment

Answer

Interest earned on savings

Question 31

Which of the following actions can typically reduce your income tax liability?

Accepted Answer

Utilizing tax-free allowances

Answer

Low economic growth

Answer

High interest rates

Answer

Increased government spending

Question 32

Which of the following is a direct benefit of paying income tax?

Accepted Answer

Funding public services such as healthcare and education

Answer

Boosting economic growth

Answer

Reducing government debt

Answer

Increasing personal wealth

Question 33

How does inflation typically affect income tax?

Accepted Answer

It can increase the amount of tax you pay, as your income may be pushed into a higher tax bracket

Answer

It has no impact on income tax

Answer

It reduces the amount of tax you pay

Answer

It makes it easier to pay your income tax