Chapter 13: Personal tax and investment advice (10 marks) Flashcards
Norma earns £12,570, Betty earns £16,570 and Harriet earns £50,000. They all receive savings income of £3,000 in the current tax year. Which would be liable for tax on the savings income alone?
Norma, Betty and Harriet
Betty only
Harriett only
Betty and Harriet
Betty and Harriet
Norma’s savings income will all be covered by the starting rate band. Betty has £1,000 left of her starting rate band, plus the £1,000 Personal Savings Allowance, but that still leaves £1,000 of the savings income received to be taxed. Harriet has only the £500 Personal Savings Allowance available to her, and so is liable for tax on £2,500 of her savings income.
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Wayne, a higher rate taxpayer, is the owner of an offshore investment bond which he purchased on 1 December 2019 for £50,000. It is now November 2024 and he is considering withdrawing £15,000 in order to buy a new car, which would be his first withdrawal from the bond. It would be best for him to
Claim time apportionment relief to reduce his tax liability
Use top slicing to limit any tax liability
Put the bond into trust to avoid any tax liability on himself
Delay the withdrawal until 1 December 2024 and beyond
Delay the withdrawal until 1 December 2024 and beyond
With the 5% tax deferred allowances, from 1 December 2024 the policy will be into its 6th year, and therefore Wayne will be able to withdraw 6 x (£50,000 x 5%) = £15,000 with no immediate tax liability
Roy and Linda are married but are in the process of separating and have lived apart since July 2024. As part of the informal agreement between them, Roy has agreed to transfer ownership of an Open-Ended Investment Company (OEIC) to Linda. In order to avoid any immediate CGT charge on the transfer Roy must ensure…
ensure the OEIC is put in trust for the benefit of Linda
the transfer takes place by the 5 April 2025 at the latest
the transfer takes place by the 31 January 2026 at the latest
he has not made other gains amounting to £6,000 or more in the 2024-25 tax year
the transfer takes place by the 5 April 2025 at the latesT
‘Inter-spouse’ transfers are conducted on a ‘no gain, no loss’ basis for CGT purposes, but the couple must have been living together at some time in the tax year for this condition to apply
learn about this!!!!
Sandra is keen on purchasing a Venture Capital Trust mainly due to the tax relief available. She should be aware that
She will have to own the shares for at least three years to maintain the tax relief
She can carry back a contribution to the previous tax year to offset against her tax bill if she likes
Even if she makes a loss on the investment, which is possible, she will be able to off-set it against other investment gains
She may find the shares hard to sell in the future
She may find the shares hard to sell in the future
A potential disadvantage of investing in VCTs is the ‘illiquid’ nature of the shares – there will not necessarily be a ready market for an investor wishing to crystallise their gains / losses. Answers A and B apply to EISs, not VCTs, and losses on VCTs cannot be claimed
Raheem, currently a UK resident, is considering emigrating to live in Turkey. With regards to his existing ISA investment it is true to say that
He will definitely be able to maintain contributions as Turkey is in the EU
He will only be able to make a disposal free of UK CGT if he is non-UK resident for at least 5 years
His investment will maintain its tax efficient status in the UK but not necessarily in Turkey
The ‘ISA’ tax wrapper is lost, and the underlying product structure drives the tax treatment from his point of emigration onwards
His investment will maintain its tax efficient status in the UK but not necessarily in Turkey
The existing ISA investment can be maintained but no further contributions can be made by non-UK residents. The ‘tax-free’ ISA status may not apply in the new country of residence
