9 - Direct Investments Flashcards
Rent a room relief rules for income tax and CGT
IT
- Income upto £7,500 is tax free unless more than one person receives this then this is split proportional
- if above £7,500 no deduction for expenses
Or with no rent a room relief:
- Tax on income - expenses
CGT
- No CGT
Letting whole property, furnished and holiday let’s income tax and CGT rules
IT
- UK only income pooled together and then taxed after deductions
- Mortgage interest relief at basic rate only
- Interest on a loan is deductible
CGT
- 8% surcharge
- I’d was previously main residence then get relief on lower of £40k per person, expedition amount or amount of get to let part
- Alterations and improvements deducted on CGT only
Woodlands income tax and CGT rules
IT
- Commercial profits are exempt
CGT
- Commercial woodlands are exempt
Plant and machinery allowance
Allowance for those who let commercial property that include machines and tools (including office equipment and furniture not just industrial industry)
Is there a capital allowance for furniture on a resi. property?
No but can claim replacement furniture relief
Replacement furniture relief
Deduction for replacing furnishings within resi. (E.g. furniture, appliances)
Can claim any cost for replacing furniture less any sale for old item
Cost of replacing any essential fixtures (toilet, sink) is deductible as a repair and therefore not covered within relief
Property allowance
Full relief on income tax if resi. only rental income does not exceed £1k.
Doesn’t need to be claimed and can be ignored.
Joint owners can claim £1k each.
When is propert income considered as a trade and what are the benefits to this?
Landlord provides services such as laundry, cleaning, meals etc. like a hotel.
+ Greater scope for offsetting losses
+ tax relief on pension contributions
+ More CGT & IHT reliefs available
When are furnished holiday let’s considered a trade not earned income? (2 conditions) And what are the advantages to this?
- available to let for 210days of tax yr and actually let for atleast 105 days
- cannot be let out for more than 31says in one go or continually for more than 155 days
+ Greater scope for offsetting losses
+ tax relief on pension contributions
+ More CGT & IHT reliefs available
3 tax benefits to a woodland
- profits exempt from income tax
- IHT can be postponed until trees cut and timber sold
- commercial woodlands are exempt from CGT
Savings income allowance
£5k
Are NS&I products paid net or gross?
Gross
What NS&I products are tax free?
Direct ISA
Junior ISA
Premium bonds
Savings certificates
Children’s bonds
Demutualisation
Process of a BS becoming a bank
Mutual org. And demutualised org.
Mutual - BS who have members
Demutualised - bank who have shareholders
Min. & max. for investments:
Child bond
Savings certificate
Direct ISA
Junior ISA
Premium bonds
Direct saver
Income bond
Investment account
Guaranteed growth/income bond
Child bond: £25 - £3k per issue
Savings certificate: £100 - £15k
Direct ISA: £1 - £20k
Junior ISA: £1 - £9k
Premium bonds: £25 - £50k
Direct saver: £1 - £2m sole, £4m joint
Income bond: £500 - £1m sole, £2m joint
Investment account: £20 - £1m sole, £2m joint
Guaranteed growth/income bond: £500 - £1m
Tax free NS&I products with anogram
PICK
Premium bonds
ISA
Certificates
Kids bonds
Is there CGT on GILTS?
Only when traded, not if kept to redemption
Is there CGT on corporate bonds?
No, only when Convertable corporate bonds as CGT due on shares
Permenant interest bearing shares (PIBS)
High yielding fixed interest investments issued by building societies.
No redemption date
Perpetual subordinate bonds
PIBS when building society demutualises
How are overseas dividends taxed?
Same as UK dividends except deduct withholding tax which is a tax deducted already at source
Stock/Scrip dividend and what are the tax rules?
When a company offers the choice of receiving new shares instead of a cash dividend
Taxed same as if received a dividend on cash value
