R03 Personal allowances and the income tax calculation: free practice questions

1. Question 1 of 5

   Which statement about the personal allowance for 2026/27 is correct?

   Option A: It is £12,570, but only from the age of 16Option B: It is £11,700 for everyoneOption C: It rises with inflation each AprilOption D: It is £12,570 and is available from birth

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   The answer is D: It is £12,570 and is available from birth

   Every qualifying individual, including a baby, has a personal allowance of £12,570, frozen until 2030/31. It is deducted from net income before tax is worked out.

   Why the other options are wrong

   A

   There's no minimum age; even a newborn has a personal allowance.

   B

   £11,700 is the married couple's allowance.

   C

   It is frozen at £12,570 up to and including 2030/31.

2. Question 2 of 5

   What is the most a couple can save in 2026/27 through the marriage allowance?

   Option A: £453Option B: £1,257Option C: £252Option D: £1,260

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   The answer is C: £252

   One partner can transfer £1,260 (10% of £12,570, rounded up). The recipient gets a tax reduction of £1,260 × 20% = £252.

   Why the other options are wrong

   A

   £453 relates to the minimum married couple's allowance.

   B

   The transfer is rounded up to £1,260, and the saving is 20% of that.

   D

   £1,260 is the allowance transferred; the saving is 20% of it.

3. Question 3 of 5

   How is the blind person's allowance of £3,250 given?

   Option A: By extending the basic and higher rate bands by £3,250Option B: As a deduction from income, like the personal allowanceOption C: As a tax reducer at 20%Option D: As a tax reducer at 10%

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   The answer is B: As a deduction from income, like the personal allowance

   Registered blind people get a £3,250 allowance, deducted in calculating taxable income in the same way as the personal allowance.

   Why the other options are wrong

   A

   Band extension is for gift aid and relief at source pensions.

   C

   That's how the marriage allowance works.

   D

   That's how the married couple's allowance works.

4. Question 4 of 5

   Grace has a salary of £30,000 and UK dividends of £4,000 in 2026/27. What is her total income tax liability?

   Option A: £3,486.00Option B: £3,916.00Option C: £3,862.25Option D: £4,186.00

   Show answer

   The answer is C: £3,862.25

   Salary: (£30,000 − £12,570) × 20% = £3,486. Dividends: £500 at 0% and £3,500 × 10.75% = £376.25. Total £3,862.25.

   Why the other options are wrong

   A

   The dividends above the £500 allowance are taxable.

   B

   The first £500 of dividends falls in the dividend allowance at 0%.

   D

   Dividends in the basic rate band are taxed at 10.75%, not 20%.

5. Question 5 of 5

   Anna's taxable income for 2026/27 is £150,000, all from employment. She has no personal allowance. What is her income tax liability?

   Option A: £60,000Option B: £53,703Option C: £48,046.50Option D: £52,460

   Show answer

   The answer is B: £53,703

   £37,700 × 20% = £7,540; £87,440 × 40% = £34,976; £24,860 × 45% = £11,187. Total £53,703.

   Why the other options are wrong

   A

   That taxes all of the income at 40%.

   C

   That deducts a personal allowance, which is lost at this level of income.

   D

   That taxes everything above £37,700 at 40%; income over £125,140 is taxed at 45%.

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