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CII Diploma·ModuleR03

R03: Personal Taxation

R03 covers the UK personal taxation framework that financial advisers must understand to give compliant advice. Topics include income tax, investment income taxation, capital gains tax, inheritance tax, trust taxation, and stamp duties. R03 is widely regarded as one of the more demanding R-series units due to the breadth and detail of tax legislation covered.

Questions
318
Units
9
Topics
9

What’s in it.

9 units

Sample questions

3 of many

A few questions from this module, with the answer and a full explanation. The complete bank is available when you start practising.

  1. A client has taxable income of £42,000 in 2025/26. How much of their income is in the basic-rate band and how much is in the higher-rate band?

    • All £42,000 is in the basic-rate band because the higher rate does not begin until £50,270 of taxable income
    • All £42,000 is taxed at 40% because taxable income exceeds £37,700
    • £37,700 is in the basic-rate band (taxed at 20%) and £4,300 is in the higher-rate band (taxed at 40%)
      Correct answer
    • £40,000 is in the basic-rate band and £2,000 is in the higher-rate band
    Explanation

    Taxable income is the income remaining after deducting the personal allowance. With taxable income of £42,000: the first £37,700 falls within the basic-rate band and is taxed at 20% (= £7,540); the remaining £4,300 (£42,000 minus £37,700) falls in the higher-rate band and is taxed at 40% (= £1,720). Total income tax = £9,260. The 45% additional rate only applies above £125,140 of ANI.

  2. What is the deadline for reporting and paying CGT on a residential property disposal in 2025/26?

    • Within 60 days of completion of the disposal
      Correct answer
    • By 31 January following the end of the tax year in which the disposal occurred
    • By 6 July following the end of the tax year in which the disposal occurred
    • By 5 April following the end of the tax year in which the disposal occurred
    Explanation

    For disposals of UK residential property, CGT must be reported and paid within 60 days of completion (extended from 30 days in October 2021 following taxpayer complaints about the shorter window). This is a separate obligation from the annual self-assessment return. If the individual also files a self-assessment return, the residential property CGT is included there too, but the 60-day payment obligation stands independently. Failure to report and pay within 60 days can result in interest and penalties.

  3. What qualifies for Business Asset Disposal Relief (BADR) and what CGT rate currently applies?

    • BADR applies to qualifying shares in an AIM-listed company held for at least 3 years; the rate is 10%
    • BADR applies to residential property that has been let for at least 2 years; the rate is 18%
    • BADR applies to qualifying business disposals (e.g. sale of a business, shares in a personal company with at least 5% shareholding); the CGT rate for 2025/26 is 14%
      Correct answer
    • BADR applies to any shares in a UK company held for at least 1 year; the CGT rate is 10%
    Explanation

    Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, applies under TCGA 1992, S169H to qualifying disposals including: the whole or part of a trading business; assets used in the business on cessation; and shares in a personal company where the taxpayer holds at least 5% of ordinary shares, voting rights, and is an officer or employee for 24 months before disposal. The CGT rate for 2025/26 is 14% (increased from 10% from April 2025, and scheduled to increase to 18% from April 2026). The lifetime limit is £1,000,000.

Frequently asked questions

4 questions
What topics are covered in CII R03?

CII R03 covers the UK tax system structure, income tax, investment income taxation, capital gains tax (CGT), inheritance tax (IHT), taxation of direct and indirect investments, trust taxation, and stamp duties.

How many questions are in the CII R03 exam?

The CII R03 exam consists of 100 multiple-choice questions to be completed in 2 hours. The pass mark is 70%.

Is CII R03 hard?

R03 is considered one of the more challenging R-series units because it requires detailed knowledge of UK tax legislation across income tax, CGT, IHT, and trusts. Systematic practice with difficulty-graded questions is essential.

How should I prepare for CII R03?

Build a strong foundation in income tax first, then work through CGT and IHT systematically. CII Prep provides R03 practice questions at easy, medium, and hard levels, with detailed explanations covering all taxation topics.