Wealth and Inheritance Tax Assessment Quiz

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What is the purpose of assessing tax liabilities in arrears?

To accelerate tax flows to the government

To ensure citizens have enough income to meet their essential needs

To consider all relevant sources of wealth and income (correct)

To exempt some basic levels of income from taxation

How does the UK's PAYE scheme work for employed individuals?

Tax is levied upfront for the entire year

Individuals pay tax once a year

Tax is deducted weekly or monthly from salary (correct)

Tax payments are made only at the end of the year

What happens if a self-employed individual in the UK underestimates their earnings for a tax period?

They receive a tax rebate

They will face legal consequences

They pay more tax at the end of the year (correct)

They are exempt from paying additional tax

Why do governments seek to ensure that revenue flows are taxed only once?

To prevent double taxation Signup and view all the answers

How does taxing income in arrears differ from taxing income throughout the period?

Taxing income throughout the period allows for easier adjustments based on actual earnings Signup and view all the answers

Why might it be necessary for individuals to sell a large inherited property?

To pay inheritance tax on the property Signup and view all the answers

What type of tax is Council Tax in the UK based on?

Wealth Signup and view all the answers

Why do wealthy individuals often place their assets in trust?

To avoid inheritance tax Signup and view all the answers

Why is it easier to tax income than wealth according to the text?

Income is more indicative of cash available Signup and view all the answers

What is a key concern when taxation is determined on the value of assets?

Assets may have to be sold to generate tax funds Signup and view all the answers

Which type of tax is most commonly limited to cashflows in many countries?

Income tax Signup and view all the answers

Why might assets need to be realized when tax is determined on asset value?

To generate funds needed for tax payment Signup and view all the answers

What may happen if taxes are levied on wealth or the value of specific assets?

The revenue may be taxed twice. Signup and view all the answers

How is taxable income calculated by the government?

By adjusting total income after exempting some income and expenditure. Signup and view all the answers

In the UK, which of the following is considered tax-free income?

Income from an Individual Savings Account (ISA). Signup and view all the answers

What role does tax already paid play in determining the final tax amount to be paid?

It is deducted from total income to calculate taxable income. Signup and view all the answers

Which of the following forms of expenditure may receive tax relief?

Contributions to an approved pension scheme. Signup and view all the answers

When calculating taxable income, what does an 'allowance' refer to?

An amount that individuals are permitted to earn before paying any tax. Signup and view all the answers