Taxes applicable to a given situation or course of action and their impact: formula sheet

Key formulas

Income tax rates (non-dividend)

Basic £1 – £37,700: 20%; Higher £37,701 – £125,140: 40%; Additional over £125,140: 45%

Dividend rates are 8.75%, 33.75% and 39.35%. Dividend nil rate band is £500.

Corporation tax

Small profits rate 19% (up to £50,000); main rate 25% (over £250,000); marginal relief = (£250,000 – augmented profits) × 3/200 × taxable total profits ÷ augmented profits

Limits are for a 12-month period and are reduced for short periods or associated companies.

Capital gains tax

Lower rate 18%, higher rate 24%; annual exempt amount £3,000; BADR and investors' relief 14% on lifetime limit of £1,000,000

Rates depend on how much of the basic rate band is unused.

Inheritance tax

Nil rate band £325,000; residence nil rate band £175,000; lifetime rate 20%; death rate 40%

Taper relief: 20%, 40%, 60%, 80% for 3-4, 4-5, 5-6, 6-7 years before death.

VAT

Standard rate 20%; registration limit £90,000; deregistration limit £88,000

Late payment penalty: none up to 15 days, 3% for 16 to 30 days, 6% plus daily penalty at 10% a year over 30 days.

Stamp taxes

SDLT non-residential: 0% to £150,000, 2% on £150,001 – £250,000, 5% above £250,000. Stamp duty on shares: 0.5%

SDLT is on slices of the price. Stamp duty is paid by the buyer of shares.

Interest rates (assumed)

Official rate 3.75%; underpaid tax 8.50%; overpaid tax 3.50%

The official rate is used for beneficial loans and similar benefits.

Non-residential SDLT bands

£0 – £150,000: 0%; £150,001 – £250,000: 2%; above £250,000: 5%

Given in the ACCA tax tables (Table 20). Rates apply only to the slice of the price in each band.

SDLT on a price above £250,000

SDLT = (£250,000 − £150,000) × 2% + (Price − £250,000) × 5% = £2,000 + 5% × (Price − £250,000)

Shortcut: the first £250,000 always costs £2,000 in total.

SDLT on a price between £150,000 and £250,000

SDLT = (Price − £150,000) × 2%

No tax at all if the price is £150,000 or less.

Mixed-use rule

Mixed-use land is taxed using the non-residential bands on the whole price

Applies when the property includes both residential and non-residential parts.

Total acquisition cost

Total cost = Price + SDLT + other costs of acquisition

SDLT is paid by the buyer. For a company it forms part of the base cost of the property.

Stamp duty or SDRT on share purchase

Duty = 0.5% × consideration

The 0.5% rate for shares is given in the ATX-UK tax tables. It is charged on the buyer.

Rounding of stamp duty

Stamp duty is rounded up to the nearest £5

A rule from your studies, not in the tax table extract. SDRT is calculated to the nearest penny, but ATX-UK says calculations need only be to the nearest £.

£1,000 threshold

No stamp duty if consideration ≤ £1,000 (transfer certified)

A rule from your studies, not in the tax table extract. If the price is above £1,000, duty applies on the whole price, not just the excess.

Who pays

Payer = buyer (transferee)

The seller bears no stamp duty or SDRT on a share sale.

Tax treatment of the cost

Buyer's cost for a later gain = price + stamp duty paid

Stamp duty is an incidental cost of acquisition in the buyer's later chargeable gains computation: CGT for an individual, chargeable gains in corporation tax for a company.

Capital gains tax rates (individuals)

Lower rate 18%; higher rate 24%; annual exempt amount £3,000

The tax tables give these rates. Gains fall in the unused basic rate band first, then the higher rate applies.

Business asset disposal relief (BADR)

Rate 14% on qualifying gains up to a lifetime limit of £1,000,000

The tax tables give the rate and limit. You must check the conditions in the scenario (for example the shareholding, the officer or employee status, and the holding period). Do not assume the relief applies.

Corporation tax marginal relief

(Upper limit − Augmented profits) × Standard fraction × Taxable total profits ÷ Augmented profits

Limits are £50,000 and £250,000 and the standard fraction is 3/200. The 25% main rate applies, less this relief. Reduce the limits for associated companies and short accounting periods.

Corporation tax rates

Small profits rate 19%; main rate 25%

The marginal band is between £50,000 and £250,000. A deductible cost gets relief at the effective marginal rate.

Stamp duty on shares

0.5% of consideration

The buyer normally bears it. It is relevant when comparing a share sale with an asset sale.

SDLT on non-residential property

Up to £150,000: 0%; £150,001 to £250,000: 2%; over £250,000: 5%

The rates apply to slices of the price. Use them when an asset sale includes land or buildings.

Inheritance tax rates and taper

Nil rate band £325,000; lifetime rate 20%; death rate 40%; taper relief 20% (3 to 4 years), 40% (4 to 5), 60% (5 to 6), 80% (6 to 7)

The taper reduces the tax on a gift that becomes chargeable on death. It does not reduce the value of the gift.

Interest rates on tax (assumed)

Underpaid tax 8.50%; overpaid tax 3.50%; official rate 3.75%

Use these to value the cost of paying tax late or the benefit of deferring it.

Supplementary instructions

Round to the nearest £; apportion to the nearest month; show all workings; assume 2025/26 rates continue

Follow these every time. Workings carry marks.

Corporation tax rates

Small profits rate 19%; main rate 25%; lower limit £50,000; upper limit £250,000

Same for financial years 2023, 2024 and 2025. Limits are reduced for associated companies and short accounting periods.

Marginal relief

(Upper limit − Augmented profits) × 3/200 × Taxable total profits ÷ Augmented profits

Applies where augmented profits are between the lower and upper limits. The standard fraction is 3/200.

Income tax normal rates

Basic £1 − £37,700 at 20%; higher £37,701 − £125,140 at 40%; additional over £125,140 at 45%

Dividend rates are 8.75%, 33.75% and 39.35% for the same bands.

Savings and dividend nil rate bands

Savings nil rate: £1,000 basic rate, £500 higher rate. Dividend nil rate: £500

The 0% starting rate for savings applies where savings income falls within the first £5,000 of taxable income.

CGT rates and allowances

Lower rate 18%; higher rate 24%; annual exempt amount £3,000; BADR and investors' relief rate 14%, lifetime limit £1,000,000 each

Lower rate applies to gains falling within any unused basic rate band.

Inheritance tax

Nil rate band £325,000; residence nil rate band £175,000; lifetime rate 20%; death rate 40%

Taper relief reduces tax on death: 20% (3-4 years), 40% (4-5), 60% (5-6), 80% (6-7).

Interest rates (assumed)

Official rate 3.75%; underpaid tax 8.50%; overpaid tax 3.50%

Use the official rate for beneficial loans. Use the underpaid and overpaid rates for late or overpaid tax.

Capital allowances

Main pool 18%; special rate pool 6%; AIA 100% up to £1,000,000; structures and buildings allowance 3% straight line

Companies also get 100% first year allowance on main pool and 50% on special rate pool plant.

Other tables

Mileage: 45p to 10,000 miles, 25p over. Reliefs cap: higher of £50,000 or 25% of income. SDLT non-residential: 0% to £150,000, 2% to £250,000, 5% above. Stamp duty on shares 0.5%

SDLT is a slice system on non-residential property. Apply each rate only to the part of the price in that band.

Quick revision

• Ask first: who is the taxpayer, what is the transaction, and which taxes does it trigger?
• Non-residential SDLT: 0% to £150,000, 2% from £150,001 to £250,000, 5% above £250,000.
• SDLT is charged on each slice in its band, not on the whole price at one rate.
• Stamp duty on shares is 0.5%.
• Capital gains tax rates are 18% and 24%, and the annual exempt amount is £3,000.
• Business asset disposal relief and investors' relief: 14% rate on gains up to a £1,000,000 lifetime limit.
• Income tax bands: basic rate to £37,700, higher rate to £125,140, additional rate above.
• Inheritance tax: nil rate band £325,000, lifetime rate 20%, death rate 40%.
• Corporation tax: small profits rate 19%, main rate 25%, with marginal relief between £50,000 and £250,000.
• Assume 2025/26 rates continue unless told otherwise.
• Round to the nearest £, apportion to the nearest month, show all workings.
• Always finish a comparison with a clear recommendation and reasons.

Common mistakes

• Naming only one tax per transaction. Fix: Run through all seven tax families for every transaction and every party.
• Charging the wrong person, such as taxing the company for the director's NIC. Fix: State the taxpayer beside each tax. Employee NIC and income tax fall on the employee, employer NIC on the company.
• Applying one rate to the whole price, for example 5% × the full price. Fix: Always split the price into slices. Tax only the portion in each band.
• Using residential assumptions for a mixed-use property. Fix: Mixed-use land is taxed using the non-residential bands. State this in your answer.
• Charging the seller instead of the buyer. Fix: Write 'buyer pays' every time. Stamp duty and SDRT are transfer taxes on the purchaser.
• Using SDLT bands for a share purchase. Fix: Shares carry a flat 0.5%. The banded rates of 0%, 2% and 5% are for non-residential land and property.
• Calculating one option in full and only describing the other. Fix: Give both options a numerical calculation, even if it is brief. The comparison is what earns the marks.
• Assuming BADR applies without checking its conditions. Fix: Write down each condition and test it against the facts. If a condition fails, compute the gain at the normal CGT rates.
• Using the wrong rate for the type of income, such as the 20% rate on dividends. Fix: Split income into non-savings, savings and dividends first. Match each to its own rate and nil rate band.
• Forgetting to reduce corporation tax limits for associated companies or a short accounting period. Fix: Check the facts for associated companies and the length of the period before applying the limits.

Exam tips

• Read the requirement before the scenario and underline who you are advising. Mark allocation follows the requirement.
• Use the tax tables to pick the rate or limit, and quote the figure you use so markers can follow your workings.
• Assume 2025/26 rates continue unless told otherwise, and show workings to the nearest £, with apportionments to the nearest month.
• Professional skills marks reward a clear structure and an answer that fits the client, so use short headed paragraphs by tax or by person.
• If the scenario gives a fact that seems unneeded, such as residence, a group link or an option to tax, it usually decides whether a tax arises.
• Copy the three bands from the tax tables into your working before you start. It stops band-edge slips.
• Show each band as its own line. Method marks are awarded even if the final figure is wrong.
• State that SDLT is the buyer's cost and add it to the total acquisition cost.