Question 1

Chris Lewis is a Fashion designer who started working for Delicate-Designs Ltd on 6 April 2021. The following information is available in respect of the year ended 5 April 2022:

Chris received an income of 60,000 from Delicate-Designs Ltd. He is paid a fixed fee for each contract that he works on, and each contract lasts an average of two weeks.

Chris is under no obligation to accept any of the contracts offered; he carries out the work under his own control. He is obliged to do the work personally.

Chris works from home and never visits the premises of Delicate-Designs Ltd. He uses one room of his five-room private residence exclusively for business purposes. The total running costs of the house for the year were 5,000.

Chriss telephone bills are 600 per quarter. This is 300 per quarter higher than they were prior to the commencement of his working from home.

Chris is required to provide his own equipment. He purchased a computer for 1,800 on 6 April 2021.

Chris was born on 22 June 1959 and had the following other sources of income for 2021/22

Dividend income 8000 Building society interest received 5000 National lottery winnings 10,000

b) Calculate Chriss income tax liability and his Class 2 and Class 4 National Insurance Contributions for 2021/22, if he is treated as self-employed in respect of his work for Delicate designs limited.

Corporation Tax Financial Year FY2021 FY2020 FY2019 FY2018 FY2017 Main ratet 19% 19% 19% 19% 19% Patent box (effective rate) 10% 10% 10% 10% 10% R&D SMEs payable credit 14.5% 14.5% 14.5% 14.5% 14.5% R&D expenditure credit 13% 13% 12% 12% 11% * The main rate for FY2022 will be 19% # The main rate for FY2023 will be 25%. However, a "small profits rate" of 19% will apply to companies with profits not exceeding 50,000. Companies with profits between 50,000 and 250,000 will be subject to the main rate, but reduced by a marginal relief. Lower rate Inheritance Tax Date of transfer Nil rate Rate on life- Rate bandt time transfers on death 6 April 2006 to 5 April 2007 0 - 285,000 20% 40% 6 April 2007 to 5 April 2008 0-300,000 20% 40% 6 April 2008 to 5 April 2009 0-312,000 20% 40% 6 April 2009 to 5 April 2012 0 - 325,000 20% 6 April 2012 to 5 April 2022 0-325,000 20% 40% Residence nil rate band for 2021-22 is 175,000 # Nil rate band and residence nil rate band both frozen until the end of tar year 2025-26 40% 36% Value Added Tax Standard rate 20% (from 4 January 2011) Reduced ratet 5% Registration threshold 85,000 (from 1 April 2017) Deregistration thresholdt 83,000 (from 1 April 2017) A temporary reduced rate of 5% applies to the hospitality and tourism sector between 15 July 2020 and 30 September 2021. This rate rises to 12.5% between 1 October 2021 and 31 March 2022 and then reverts to the standard rate of 20% as from 1 April 2022. * Thresholds frozen until April 2024 2021-22 2020-21 120 184 967 170 967 120 183 962 169 962 12% 2% 12% 2% National Insurance Contributions CLASS 1 Lower earnings limit (weekly) Primary threshold (weekly) Upper earnings limit (weekly) Secondary threshold (weekly) Upper secondary threshold (weekly) Employee contributions Rate on earnings between primary threshold and UEL Rate on earnings beyond UEL Employer contributions Rate on earnings beyond secondary threshold Employment allowance CLASS 1A Rate CLASS 2 Weekly contribution Small profits threshold CLASS 3 Weekly contribution CLASS 4 Lower profits limit Upper profits limit Rate on profits between lower and upper limit Rate on profits beyond upper limit 13.8% 4.000 13.8% 4.000 13.8% 13.8% 3.05 6,515 3.05 6,475 15.40 15.30 9,568 50.270 9% 2% 9.500 50,000 9% 2% Capital Gains Tax 2021-22 2020-21 Standard ratet 10% 10% Higher ratet 20% 20% Business asset disposal relief rate 10% 10% Business asset disposal relief lifetime limit 1,000,000 1,000,000 Annual exempt amount 12.300 12.300 Taxable gains on the disposal of residential property are taxed at 18% and 28% + Annual exempt amount frozen at 12,300 until the end of tax year 2025-26 Summary of Tax Data PERSONAL ALLOWANCES 2021-22 2020-21 Personal allowancet 12.570 12,500 Marriage allowance 1.260 1.250 Blind person's allowance 2520 2.500 Married couple's allowance: Born before 6 April 1935 9.125 9,075 Minimum amount 3530 3,510 Income limit for basic personal allowance 100.000 100,000 Income limit for married couple's allowance 30.400 30.200 Personal allowance frozen at 12,570 until the end of tax year 2025-26 CAR AND FUEL BENEFIT Zero emissions 0% *1-50 g/km (depending upon electric range) 29-14% 2% -14% *51g/km to 54g/km 15% 15% *55g/km to 59g/km 16% 16% *60g/km to 64g/km 17% 17% *65g/km to 69g/km 18% 18% *70g/km to 74g/km 19% 19% *75g/km 20% 20% Each additional 5g/km +1% +1% Maximum charge 37% 37% Amount used in car fuel benefit calculation 24,600 24,500 * These percentages are 1% lower in 2021-22 and 2% lower in 2020-21 if the car was registered on or after 6 April 2020 CAPITAL ALLOWANCES Writing Down Allowance (WDA) Main pool of plant and machinery 18% Special rate pool of plant and machinery 6% 6% Annual Investment Allowance (AIA) 100% 100% AIA annual limit from 1 January 2016 200,000 200.000 First Year Allowances (FYAs) 100% 100% Structures and Buildings Allowances (SBA) 3% AIA annual limit temporarily raised to Im between 1 January 2019 and 31 December 2021 PENSION SCHEMES Annual allowance 40.000 40.000 Lifetime allowancet 1,073.100 1.073,100 Lifetime allowance frozen at 1.073,100 until the end of tax year 2025-26 18% 3% Summary of Tax Data 0% 0% Income Tax 2021-22 2020-21 TAX RATES AND BANDS Basic rate 20% 20% Higher rate 40% 40% Additional rate 45% 45% Basic rate limitt 37.700 37.500 Higher rate limit 150,000 150.000 Different tax rates and bands apply to the non-savings income of Scottish taxpayers (see below) * Basic rate limit frozen at 37,700 until the end of tax year 2025-26 Starting rate for savings Starting rate limit for savings 5,000 5.000 Personal savings allowance (basic rate taxpayer) 1,000 1.000 Personal savings allowance (higher rate taxpayer) 500 500 Dividend ordinary rate 7.5% 7.5% Dividend upper rate 32.5% 32.5% Dividend additional rate 38.1% 38.1% Dividend allowance 2,000 2.000 SCOTTISH TAX RATES AND BANDS Starter rate 19% 19% Basic rate 20% 20% Intermediate rate 21% 21% Higher rate 41% 41% Top rate 46% 46% Starter rate limit 2,097 2,085 Basic rate limit 12.726 12.658 Intermediate rate limit 31,092 30,930 Higher rate limit 150,000 150.000 * These tax rates and bands apply only to the non-savings income of Scottish taxpayers