ACCA Advanced Taxation (ATX) Practice Exam

What is the first payment in respect of the individual's income tax due on January 31, 2025?

1. 50% of the total tax for the current year

2. 60% of the tax liability assessed for the previous year

3. 100% of the income tax for the previous year

4. 50% of the income tax for the previous year

The correct answer is: 50% of the income tax for the previous year

To determine the correct payment due for an individual's income tax on January 31, 2025, it is important to understand how income tax payments are structured under the self-assessment system in the UK. When an individual files their tax return, they can be required to make payments on account towards their future tax liabilities based on their previous year's income tax bill. For most individuals, the first payment on account is typically due by January 31 following the end of the tax year, and it is calculated as 50% of the previous year's income tax liability. In this case, since the question pertains to the income tax due on January 31, 2025, this payment would reflect 50% of the total income tax due for the year ending April 5, 2024. The rationale behind this is that the tax system aims to collect tax in advance of an individual's actual tax liability for the current year. The use of the previous year's tax assessment provides a basis for these provisional payments. Therefore, the selection stating 50% of the income tax for the previous year aligns perfectly with the taxation rules determining the first payment on account. This understanding helps individuals comply with tax regulations and plan their finances accordingly.