R03 Interest relief, charitable giving and pension relief: free practice questions

1. Question 1 of 5

   In what order are the figures reached when working out the income on which tax is calculated?

   Option A: Total income, less the personal allowance gives net income, less reliefsOption B: Net income, less reliefs gives total income, less the personal allowanceOption C: Total income, less reliefs gives net income, less the personal allowanceOption D: Total income, less the personal allowance and gift aid gives taxable income

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   The answer is C: Total income, less reliefs gives net income, less the personal allowance

   Start with total income, deduct reliefs given by deduction from income (such as qualifying interest) to get net income, then deduct the personal allowance.

   Why the other options are wrong

   A

   Reliefs come off first to give net income; the allowance comes after.

   B

   Total income is the starting point, not net income.

   D

   Gift aid relief works by extending the bands, not by deduction.

2. Question 2 of 5

   For the cap on income tax reliefs, how is adjusted total income calculated?

   Option A: Total income less payroll giving, plus pension contributionsOption B: Total income plus payroll giving, less all pension contributionsOption C: Total income less gift aid donations and the personal allowanceOption D: Net income, less the gross amount of any gift aid donations made

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   The answer is B: Total income plus payroll giving, less all pension contributions

   Adjusted total income = total income + charitable donations through payroll giving − all types of pension contribution.

   Why the other options are wrong

   A

   The adjustments work the other way round.

   C

   Gift aid and the personal allowance aren't part of this calculation.

   D

   That's closer to the adjusted net income used for the personal allowance.

3. Question 3 of 5

   An additional-rate taxpayer pays £8,000 to charity under gift aid. What is the total tax saved, including the charity's reclaim?

   Option A: £4,500Option B: £2,500Option C: £3,600Option D: £2,000

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   The answer is A: £4,500

   Gross = £10,000. The charity reclaims £2,000 and the donor saves a further 25% on £10,000 (£2,500) by extending the bands. Total relief = 45% of £10,000 = £4,500.

   Why the other options are wrong

   B

   That's only the donor's own extra relief.

   C

   That's 45% of the net payment, not the gross donation.

   D

   That's only the basic rate reclaimed by the charity.

4. Question 4 of 5

   How is tax relief given for gifting a pre-eminent object to the nation?

   Option A: Exemption of the object from CGT onlyOption B: A reduction of 20% of its value in the year of the giftOption C: A reduction of 30% of its value, spread over up to five yearsOption D: A deduction of its full market value from total income in that year

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   The answer is C: A reduction of 30% of its value, spread over up to five years

   The donor gets a tax reduction worth 30% of the object's value, usable against income tax or CGT and spread over up to five years under a schedule set in advance. Unused reductions in a year are lost.

   Why the other options are wrong

   A

   There's an income tax and CGT reduction too.

   B

   The rate is 30%, and it can be spread forward.

   D

   The relief is a 30% tax reduction, not a deduction from income.

5. Question 5 of 5

   What is the lowest level to which the annual allowance can be tapered for 2026/27?

   Option A: £10,000Option B: £3,600Option C: £4,000Option D: £20,000

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   The answer is A: £10,000

   The annual allowance is tapered by £1 for every £2 of income above £260,000, down to a minimum of £10,000.

   Why the other options are wrong

   B

   £3,600 is the gross contribution limit for someone without earnings.

   C

   The tapered allowance can't fall below £10,000.

   D

   The taper continues below £20,000, down to £10,000.

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