10 - Indirect Investments (D)

Question 1

ISAs are open-ended investment plans. True or false?

Answer 1

False, they are closed-ended (they are not sold in units)

Question 2

ISA managers must be HMRC approved. True or false?

Answer 2

True

Question 3

ISA investors can be non-UK resident in what circumstance?

Answer 3

They can be a non-resident Crown employee working overseas or their spouse or civil partner

Question 4

Individuals aged 16 and 17 can invest in which type of ISA?

Answer 4

Cash ISA
JISA

Question 5

JISAs are available to all children who did not get a CTF. This would include any child born on or after which date?

Answer 5

3 January 2011

Question 6

Who can contribute to a JISA and what is the 2023/24 subscription limit?

Answer 6

Parents, family and friends can contribute up to £9,000 in total for the 2023/24 tax year

Question 7

When can a child withdraw money from their JISA?

Answer 7

When they turn 18

Question 8

If an investor transfers their shares from an approved profit-sharing scheme or an SAYE scheme, to an ISA, how soon should this be done?

Answer 8

Within 90 days of receiving the shares

Question 9

What is the government bonus on a H2B ISA and what is its limit?

Answer 9

25% bonus, up to max. £3,000 bonus on £12,000 savings
(12,000 x 25% = 3,000)

Question 10

The H2B bonus is available for purchase of homes up to what amount?

Answer 10

London £450,000
Elsewhere £250,000

Question 11

The H2B ISA can be used as the deposit for a new home. True or false?

Answer 11

False, the buyer must get together their own deposit and the funds from the ISA can only be used towards the purchase price.

This is because the H2B ISA funds are paid out at completion and not before.

Question 12

H2B ISA

1. Maximum initial deposit and maximum monthly saving thereafter?
2. Minimum amount to qualify for bonus, and minimum bonus amount?
3. Type of ISA (cash, stocks and shares, innovative etc.)?
4. Minimum age to open?

Answer 12

£1,200 initial maximum followed by £200 pm maximum

£1,600 of savings to qualify for bonus, therefore £400 in bonus (25% of £1,600)

Cash ISA

Age 16

Question 13

You can invest in both a H2B and cash ISA at the same time. True of false?

Answer 13

False - they are both cash ISAs

Question 14

Lifetime ISA

1. Age must the investor be to open the account?
2. Annual investment limit?
3. Government bonus amount, and until when?

Answer 14

18 - 39

£4,000

25% until age 50

Question 15

Which ISA can remain open as a retirement fund after you have used it to buy your first home?

Answer 15

Lifetime ISA

Question 16

What is the penalty amount if you withdraw funds from your lifetime ISA prematurely? (Either to use it for a purpose other than buying your first home, or withdrawing the balance before age 60 after you have bought your first home).

Answer 16

25% which is equivalent to the government bonus, so in effect they take the bonus back off of you

Question 17

Property prices have risen significantly since the introduction of the lifetime ISA but the property caps of £250,000 and £450,000 remain. Are investors able to withdraw their funds as they are unable to afford to use them anymore?

Answer 17

Yes, but those locked out of using their Lifetime ISA because of higher property prices will incur the 25% penalty charge if they want to reclaim their savings before the age of 60. In effect, the rise in property prices has not had an impact on the penalty amount.

Question 18

Which ISA can contain a mixture of cash and stocks and shares? H2B or lifetime?

Answer 18

Lifetime.

H2B is cash only.

Question 19

An individual who invests in more than one type of ISA in a tax year can use the same or different providers. True or false?

Answer 19

True

Question 20

How soon after death does an ISA remain a continuing account?

Answer 20

Either until the administration of the estate is complete, the ISA is closed, or 3 years and 1 day since death, whichever is sooner.

Question 21

Someone age 16-17 can benefit from a £29,000 ISA investment limit, how is this possible?

Answer 21

There is no interaction between a stocks and shares JISA and a cash JISA, so they are allowed a £20,000 limit from the stocks and shares ISA plus £9,000 from the cash JISA.

Question 22

Cash ISAs can be transferred to a stocks and shares ISA, and vice versa. True or false?

Answer 22

True

Question 23

Why is it important that the investor shares their NI number with the ISA manager?

Answer 23

As the ISA manager is responsible for reporting and reclaims with HMRC and they cannot do this without the NI

Question 24

Can an investor keep their ISA open if they cease to remain a UK resident?

Answer 24

Yes but they cannot pay any more into it until the become resident again

Question 25

Why might it not be beneficial for a ‘small saver’ to invest in an ISA?

Answer 25

They way as well make use of the personal savings allowance first outside of an ISA (£1,000 basic rate taxpayers and £500 higher rate tax payers). If not, and they invest into an ISA, they will lose the allowances as they cannot be carried forward.

Question 26

Children born between which dates were entitled to child trust funds?

Answer 26

After 31 August 2002, but before 3 January 2011

Question 27

What is the CTF subscription limit?

Answer 27

£9,000, same as today’s JISA

Question 28

What are the 3 types of CTFs?

Answer 28

1. savings accounts;
2. accounts that invest in shares; and
3. stakeholder CTF accounts: these invest in shares but in such a way as to minimise the risk. Charges are limited to 1.5% a year.

Question 29

Funds from a CTF cannot be withdrawn until the child reaches 18, except in which circumstance?

Answer 29

Terminal illness

Question 30

You cannot place any more money into a CTF after the child turns 18. True or false?

Answer 30

True

Question 31

Maturing CTFs can be transferred into an ISA without affecting the subscription limit. True or false?

Answer 31

True

Question 32

CTFs run on a yearly basis for the purpose of subscription limits, but this is not the tax year? Instead, when does the year start?

Answer 32

Start date is the child’s birthday

Question 33

If a child has a CTF, can they also have a Junior ISA?

Answer 33

No, but you can transfer the CTF to a JISA. The JISA replaced the CTF.

Question 34

If investment income from a CTF is more than £100 gross in a tax year, where the capital came from the parent, is the parent taxed?

Answer 34

No