Ch 10 - Indirect Investments Flashcards
What are the three main stages to understand a tax wrapper?
- How initial investment is taxed
- How the funds are taxed within the wrapper
- How the proceeds are taxed on the investor
What are the advantages of investing in a registered pension scheme?
- Tax relief on input/contributions
- No tax on capital gains/investment income (tax free growth)
- 25% tax free cash
- Tax free death benefits before age 75
What is the max pension contribution that qualifies for tax relief?
£40k or 100% of earnings if less
What can those with no earnings contribute to their pension?
£3600
Once a pension fund has been accessed, what is the future annual allowance (MPAA)?
£4000
How is the £40k pension allowance reduced when someone’s adjusted income is over £240,000?
Reduced by £1 for every £2 down to a minimum of £4,000
What is the lifetime allowance?
£1,073,100
What is the tax free lump sum that can be taken from a pension fund?
25% pension commencement lump sum (PCLS)
What is the earliest retirement age?
55
How are death benefits treated if a death occurred after 75?
Taxed as beneficiaries income
What three ways can members of defined contribution (DC) schemes can receive income?
- Funds can be crystallised and can withdraw 25% PCLS, then withdraw the remainder as flexi-access drawdown
- Funds can be left uncrystallised and withdrawals taken ad hoc, w/ 25% of each withdrawal being tax free and the rest subject to income tax (UFPLS)
- An annuity can be purchased after taking the 25% PCLS
How many years pension allowance can be carried forward?
Prev 3 years
What income do DC schemes provide?
Scheme pension
Pension schemes cannot borrow more than what %?
Gearing limited to 50% of fund
What is the taxation of a pension fund?
Tax free on gains and investment income
Who is eligible for an ISA?
UK resident, crown employee working overseas or their spouse
If cash is invented into a cash ISA is from a parent, how much can be earned before it is taxed as the parents?
£100 p/y
Those aged 16/17 can contribute how much to an ISA?
£20,000 ISA + £9,000 JISA
What is an additional permitted subscription?
ISA benefits passed to a surviving spouse on death
A deceased ISA account becomes a continuing account until when?
Earlier of account being closed or 3 years and one day from death
A surviving spouse can invest how much?
Can invest own allowance + higher of:
- The value of the deceased’s ISA savings at the time of death; or
- The value of the deceased’s ISA savings at the time the continuing account ends
Does income and chargeable gains have to be declared on a tax return for an ISA?
No - tax free
What are the features of a CTF?
- Child born between 31/08/02 - 01/11/11 entitled
- Initial voucher £50-250
- £9000 limit until age 18
- Free on income tax & CGT
- Exempt from £100 parent rule
What is the difference between the start date for the contribution limit of a JISA/CTF?
CTF = child's birthday JISA = tax year
What are the three types of CTF?
- Savings account
- Accounts that invest in shares
- Stakeholder CTF accounts
Are OEICS/Unit Trust open ended or closed ended?
Open
Are investment trusts open ended or closed ended?
Closed
Who are offshore collectives
