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ACCA Applied Skills · Taxation (UK) · The use of exemptions and reliefs in deferring and minimising income tax liabilities

Mia has adjusted net income of £70,000 in the tax year and her partner receives child benefit of £2,000 for the year. Under the child benefit income tax charge, 1% of the child benefit is charged for every £200 of income over £60,000. What is the income tax charge?

The charge is £1,000. Income exceeds £60,000 by £10,000, which is 50 steps of £200, so 50% of the £2,000 child benefit is charged. The full amount is only clawed back when income reaches £80,000.

  1. A£1,000Correct
  2. B£2,000
  3. C£200
  4. D£500

Explanation

Income over £60,000 is £10,000. £10,000 / £200 = 50 steps, so 50% of the child benefit is charged. 50% x £2,000 = £1,000. The £2,000 option wrongly applies a full 100% charge, which only applies at £80,000 of income.

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