9 - Direct Investments

Question 1

What are some direct investments

Answer 1

Cash
Gilts/Fixed interest instruments
Individual Property
Individual shares or equities

Question 2

What are some indirect investments?

Answer 2

ISAs
Collectives
Life assurance
Pensions

Question 3

What is PSA

Answer 3

£1,000 Basic rate
£500 Higher
0 - Additional

Question 4

How is bank account/building society and NS&I interest paid?

Answer 4

Gross

Question 5

What are the two types of NS&I Bank accounts

What are the key differences?

Answer 5

Investment Account
Direct Saver Account

Direct Saver - 16+ -> Investment account can be managed for 16 and under by parents
Direct Saver - Higher IR
Direct Saver - Only managed online/telephone

Investment Account - min £20 and max £1million - joint
Direct saver - min £1 and max £2m or £4m joint

Both can withdraw no notice and policy

Question 6

NS&I Saving certificates -> What is the terms and conditions/payout for these certificates?
Fixed interest certificates
Index-linked saving certificates

Answer 6

Fixed interest - Up to 5 years - lump sum investment, tax-free interest added
Index- linked -> Up to 5 years - Lower interest rates - takes into account inflation

Question 7

NS&I Green Income bonds - how are these paid
What are the conditions to obtain one?

Answer 7

Pay interest monthly at variable rate
Taxed at savings income

Can be withdrawn anytime - no notice
16+
Min investment £500. max of £1million

Question 8

NS&I Green saving bonds - How are paid/ Conditions to obtain one

Answer 8

3 YEAR TERM - 4.2% Interest
No withdrawls until 3 years
16+
Min income £100 - Max of £100,000

Question 9

NS&I Guaranteed Income and Growth Bonds - How are paid/conditions

Answer 9

**Fixed rate saving bonds - fixed rate of interest*

Guaranteed income: Monthly income
Guaranteed Growth Interest is reinvested

Interest taxed as saving income

Terms:
1 Year term
NO withdrawls until end of 1 year
Can ONLY be done ONLINE
Min invest - £500 max £1m

Question 10

NS&I Direct ISA - when is interest added/ how can obtain one

Answer 10

Interest credited on 5th April
TAX FREE
Min deposit **£1*

Question 11

NS&I Premium Bonds - what are they?

Answer 11

Pay Prizes rather than fixed returns
Capital Protected - average prize fund interest of 3.3%

Monthly prizes - £25 - £1m are tax free
Cashed in at anytime no notice/penalty

Min holding - £25 - max holding £50,000

Attractive for higher earners

Question 12

How often are Gilts paid

Answer 12

Twice a year and gross

Question 13

How is interest paid on corporate bonds?

Answer 13

Interest paid gross

Question 14

How is interest paid on Local Authority Bonds

Answer 14

Interest paid gross

Question 15

How are Shares Taxed - if shares grow

Answer 15

CGT

Question 16

How are Dividends paid in UK

Answer 16

Gross subject to Dividend allowance
0.875% - Basic
33.75% - Higher
39.35% - Additional

Question 17

How is a Stock dividend differently taxed to a Cash

Answer 17

Stock Dividend - Equivalent of cash dividend - just used interest to purchase new stock
Taxed in same way as if client was receiving interest as cash

Question 18

How are overseas dividends taxed?

Answer 18

Liable to income tax - same rate of dividend

Question 19

What is the limit for cash basis in property

Answer 19

Rental income does not exceed £150,000

Question 20

How much is the Annual investment allowance

Answer 20

First £1m of expenditure on plant and machinery allowance

Question 21

What is the premium on short leases - Conditions

Answer 21

When Lease is granted for less than 50 years

Proportion of 50 years is taxed

Question 22

What is a reverse premium

Answer 22

Sum paid by a landlord to induce tenant to take out lease
-** Tenant is taxable on premium **

Question 23

What is the business asset disposal relief rates?

Answer 23

10% instead of -> up to lifetime limit of £1m

18%: residential property gains within the basic rate band;
20%: non-residential property gains above the basic rate band; or
28%: residential property gains above the basic rate band.

Question 24

What are furnished holiday letting relief?

Answer 24

210 days - available in total per year
105 in total per year let
No more than 155 days in total per year

Question 25

What about woodlands? What are the tax advantages?

Answer 25

Propefits generated are exempt from income tax
IHT can be postponed if Woodland owned for 5+ years
Woodlands are also exempt from CGT