My name’s Marcus. I work for a bank. I’m on PAYE (Pay As You Earn). This means that tax is automatically deducted from my salary. My salary isn’t particularly high, so I only pay tax at the basic rate. My personal allowance is £5,000 a year. Then I pay 10% on the next £2,500, and 22% on everything above that. I also have to pay National Insurance, of course, which is another 9%. My gross pay is about £19,000 but my take-home pay is around £15,000.
My name’s Yvonne. I’m a self-employed dentist. Every year I have to fill in a tax return. Dentists can earn quite a lot of money, and my income is usually well into the higher rate. In other words, I have to pay 40% on everything I earn over £45,000 a year. However, the salary I pay my receptionist, the rent for my surgery and the cost of my equipment are all tax deductible. Only about half my turnover counts as taxable income. The National Insurance rules are quite complicated for self-employed people, but my accountant takes care of that for me.
A. Does each sentence describe Marcus, Yvonne, both or either?
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Marcus |
Yvonne |
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1 Is a tax payer |
x |
x |
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2 Works for himself / herself |
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3 Has tax deducted at source |
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4 Submits an annual tax return |
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5 Income exceeds the personal allowance |
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6 Income exceeds the 10% band |
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7 Income exceeds the 22% band |
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8 Pays tax at the higher rate |
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9 Net earnings are about £4,000 lower than gross earnings |
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10 Gross earnings are below the National Insurance threshold |
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11 Pays National Insurance |
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12 Has tax-allowable expenses |
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13 Employs an accountant |
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14 Lives entirely on unearned income |
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B. Match the type of tax with the definition.
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1 Income tax |
a. Tax on profits made by selling assets such as businesses, rented houses and shares. |
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2 Capital gains tax |
b. A tax on specific transactions. For example, in the UK, it is payable by the buyer of a house. |
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3 Value Added Tax (VAT) |
c. Tax on earnings, profits from investments and any other sources of personal income. |
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4 Stamp duty |
d. Tax on goods and services. In the UK it is charged at 17.5%. |
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5 Wealth tax |
e. In the UK, this is the name for the tax paid by companies. |
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6 Inheritance tax |
f. Tax on assets (such as houses) payable in some countries, but not in the UK. |
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7 Corporation tax |
g. Tax on the assets of a person who has died. Used to be called “death duties”. |
C. Match the terms with the examples. It’s not easy – some of the terms have close meanings.
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1 tax relief |
a. Ms Brown is British, but to save tax she lives in Monaco. |
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2 tax break |
b. No tax is payable on winnings from the National Lottery. |
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3 tax exile |
c. From April 6th next year, theatres will not have to pay tax on profits below £20,000. |
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4 direct taxation |
d. VAT |
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5 indirect taxation |
e. Ms Smith pays an accountant to find legal ways to reduce her tax liability. |
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6 tax avoidance |
f. income tax |
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7 tax evasion |
g. Liability for capital gains is reduced by 7.5% for each year of ownership of the asset. |
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8 tax free |
h. Mr Jones made a profit of £100,000 from selling a business, but didn’t declare it to the Inland Revenue. |
D. Choose the best word from each pair in underline type.
1 Alan’s company is registered in his wife’s name for tax reasons / motives.
2 Until last year, some companies paid part of their executives’ salaries in valuable antiques, to save tax. However, the government has now closed this wormhole / loophole.
3 In the UK, food and children’s clothes are free / exempt from VAT.
4 Only about 4% of the population are in the highest tax bracket / level.
5 Any company which relocates to Wales will pay not tax for the first two years. This tax incentive / gift is designed to help reduce unemployment in the region.
6 Last year I paid too much tax, so this year I received a tax refund / rebate.
Answers
A:
|
|
Marcus |
Yvonne |
|
1 Is a tax payer |
x |
x |
|
2 Works for himself / herself |
|
x |
|
3 Has tax deducted at source |
x |
|
|
4 Submits an annual tax return |
|
x |
|
5 Income exceeds the personal allowance |
x |
x |
|
6 Income exceeds the 10% band |
x |
x |
|
7 Income exceeds the 22% band |
|
x |
|
8 Pays tax at the higher rate |
|
x |
|
9 Net earnings are about £4,000 lower than gross earnings |
x |
|
|
10 Gross earnings are below the National Insurance threshold |
|
|
|
11 Pays National Insurance |
x |
x |
|
12 Has tax-allowable expenses |
|
x |
|
13 Employs an accountant |
|
x |
|
14 Lives entirely on unearned income |
|
|
B: 1 c, 2 a, 3 d, 4 b, 5 f, 6 g, 7 e
C: 1 g, 2 c, 3 a, 4 f, 5 d, 6 e, 7 h, 8 b
D: 1 reasons, 2 loophole, 3 exempt, 4 bracket, 5 incentive, 6 rebate
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