PQ magazine is for part qualified accountants.
Read the latest web issue here – if you like what you see sign up today
AAT Level 4: Tax or not?
Experienced tutor Aidan Elliss offers some tips on choosing your AAT Level 4 tax options
Congratulations! You’ve made it through to Level 4, and now it’s time to pick your options. Should you do the tax units? Should you do both or just one?
Tax isn’t easy, there are a lot of complex rules to understand and learn, but the actual assessments are fairly straightforward.
There’s a lot to be said for doing both units, as the same capital gains tax rules are tested in both. In Personal Tax you will study the income tax computation. Here we list the different sources of income, total them, deduct allowances then calculate tax. The calculation of each source of income has its own set of rules. In Personal Tax you will study employment income, property income, savings and dividend income.
However, you don’t get to see how income from self-employment for a sole trader or partner is calculated. If you do Business Tax that completes the jigsaw – calculation of income for a self-employed person is a key part of the syllabus. However, the rest of the income tax computation is not on the Business Tax syllabus, so if you just do this unit you are only seeing part of the calculation.
If you are doing both units it makes sense to do Personal Tax first, as the understanding of the big picture you get here will help you put things in Business Tax into context.
So what if you only want to do one? Well, in addition to income tax Personal Tax covers national insurance for an employed person and inheritance tax, and also looks at ethical considerations in lots of detail.
Business Tax covers NI for the self-employed and Corporation Tax, but looks at ethical considerations in less detail. It also covers a lot of administration, for example tax returns, deadlines (when these should be filed) and tax paid (and the penalties that would arise if these deadlines are missed). It also looks into the capital gains tax reliefs that are available for businesses.
Under the old syllabus we could confidently say Personal Tax was an easier option than Business Tax – it was a lot shorter! However, under the new syllabus Personal Tax now includes inheritance tax and there’s lots to cover here. On balance, though, Personal Tax is probably still a smaller syllabus.
So the choice is yours, depending on your personal interest and what you think will be useful in your career.
• Aidan Ellis is an AAT tutor at BPP Professional Education
Subscribe to RSS