In this guide we will introduce you to the Principles of Taxation exam. We will cover what the Principles of Taxation exam is, the format of the exam, the topics covered in the exam and what to look out for.
The Principles of Taxation exam covers fundamentals of UK taxation. You will learn about the administration and computation of the main taxes levied on individuals and/or companies. These include:
- Income tax
- National insurance contributions
- Capital gains tax
- Corporation tax
- Value added tax.
There is no assumed knowledge for this exam. If you continue onto the Professional Level this subject is assumed knowledge for both Tax Compliance and Business Planning: Taxation.
What to expect when sitting the exam
The exam contains 42 questions. There are two scenario-based questions worth 10 marks each, one on corporation tax and one on income tax and NICs. The remaining 40 questions are worth two marks each and cover the rest of the syllabus in line with the syllabus weighting. These 40 questions are multiple choice, multi-part multiple choice, multiple-response, or numeric entry questions.
You have 1.5 hours to complete the exam. You may find that some questions will take less than this, and some will take more time. It is important to move on in the exam and answer the easier questions first. You can flag the more challenging questions and return to these later.
By clicking a link in the exam, you will be taken to the tax tables. You can also find these at the front of the question bank, but you will be using an electronic copy on screen in the real exam.
Preparing for the exam
Study phase
Allow yourself enough time to work through all the learning materials. There are a number of calculations in the syllabus that it is important to practise. Work through all examples yourself to ensure you are happy with them. At the end of each chapter in your workbook, you are provided with additional questions, which you should complete to confirm your understanding.
When practising questions keep the tax tables to hand in the question bank. This will allow you to get used to using the information that is provided in the exam.
If you have not done so already, purchase a calculator from the approved list and use this for all question practise.
Revision phase
Tax is about rules, not logic. The best way to learn these rules is by question practise. Complete all the questions in the question bank. When completing calculative questions write down workings so you can review these along with the answer to ensure you understand where you have gone wrong. Complete the sample exam on the ICAEW website.
What to look out for
- Administration is a big area, but a lot of the material is contained in the tax tables. Ensure you are happy with what is in there and where to find it.
- Ensure you read the question requirement carefully. A question asking for taxable income could provide the same information as one asking for income tax liability, but the answer would be very different.
- Practise the proformas for the two scenario-based questions.