2. NI, CGT, IHT

Question 1

National Insurance

Answer 1

Scheme where employed people make payments (NICs) towards benefits.

Must be earning above the ‘primary contribution threshold’ (£162 p.w)

Must pay NICs for 35 years to receive max State Pension

Question 2

Capital Gains Tax

Answer 2

CGT is paid by UK residents on sale of an asset.

10% for Basic rate taxpayers
20% for Higher + Additional

Due on 31st January 2019

Question 3

CGT Specific Asset Rates

Answer 3

Second Residential Property - 18% and 28% (B, H+A)

Business Assets (with entrepreneur’s relief) - 10% flat

Question 4

Gains Exempt from CGT

Answer 4

£11,700 of gains is exempt each year

Only net gains are taxed (capital losses can be deducted). If losses exceed gains for a year, they can be carried forward indefinitely

Question 5

Assets exempt from CGT

Answer 5

• Main home and private cars
• ISAs
• NSandI certificates and premium bonds
• betting / lottery winnings
• Gilts and most corporate bonds
• Shares under EIS / SEIS if income tax relief has not been withdrawn
• Foreign currency for personal use only

Question 6

Inheritance Tax

Answer 6

Charged on individual’s estate at death, gifts made in 7 years prior and on chargeable lifetime transfers (CLTs)

Charged above nil rate band of £325,000 at 40%

Percentage of nil rate band can be transferred to surviving spouse (% used since NRB may have changed)

Question 7

Exemptions from IHT

Answer 7

1. Estate or Lifetime Gift passes to spouse / civil partner both living permanently in UK
2. Certain gifts such as wedding up to £5,000, charity and annual gift amount of £3,000
3. Anyone leaving 10% of net estate to charity benefits from reduced 36% IHT
4. RNRB

Question 8

Exemption from IHT: RNRB

Answer 8

Additional allowance when home / share of home is passed onto children (grand, step, foster but not any other family members e.g. nieces)

Current £125,000 in 18/19, £150,000 in 19/20, £175,000 in 20/21, where it will increase with CPI after

In 18/19 the combined nil rate band is £450,000, however there is a tapered withdrawal of the RNRB segment if estate exceed £2m

Question 9

Potentially Exempt Transfer

Answer 9

PET - when a person makes a lifetime gift which is not covered by one of the exemptions

Free of IHT when donor lives 7 years on

Question 10

Chargeable Lifetime Transfer

Answer 10

CLT - transfer into a trust which is immediately subject 20% IHT if the value exceeds the NRB (after allowable deductions such as £3,000 annual exemption)

Effectively property can be passed out of an estate, into a trust, once every 7 years at the NRB value. Or NRB/7 every year

If the donor does not survive 7 years, the CLT will be added to the deceased estate and subject to 40% IHT (after taking into account NRB, RNRB). Credit will be allowed for the 20% already paid.]

Taper Relief may apply if donor survives at least 3 years