Direct Investments Flashcards
How is tax worked out for savings interest.
£12,570 personal allowance
0% for someone with taxable earned income below £5000 (savings only)
£1000 free basic (savings only)
£500 free higher (savings only)
Banks Building societies and collective most fixed interest investments pay interest….
Gross
Forms of savings such as from life annuities pay interest….
Net of 20% savings rate
Non taxpayers and those liable to only the starting rate can….
While higher and additional rate will…
Reclaim excess tax paid using HMRC form R40.
Have further tax to pay.
To ensure the correct tax is paid, what should be done?
Anyone re ieving interest should declare it on their tax return.
Describe NS&I ISA
Tax free Cash ISA with minimum £1 subscription.
Only available online and on the phone.
Describe NS&I junior isa.
Tax-free
Up to £9000
Min contribution £1
Describe NS&I certificate
Not on sale but avialbel for maturing certificates.
Tax free
Penalty 90 days interest early withdrawal.
Fixed interest
Index linked - linked to RPI or CPI for those after 1/5/19
Discribe NS&I growth bonds
Not on sale and no access till maturity for those after 01/05/19
Pay guaranteed fixed return
Paid gross (tax return)
Minimum £500 per person
Maximum £10000 per person
Over 16s single or joint
Discribe green bonds
3 year fixed savings - no withdrawals for 3 years
Anyone over 16
Investment online
Paid gross (tax return)
Describe NS&I bank accounts
Investment accounts-
£20
Max £1m sole £2m joint
Easy access
Postal only
Paid gross
Direct saver
Internet phone only
Min £1
£2m sole £4m joint max
Paid gross
What NS&I products are tax free?
Premium bonds
ISA
Certificates
Kids ISA
How are tax fixed interest securities taxed?
No CGT, but also no losses.
Taxable as savings income.
Paid gross. (Tax return)
Same for PIBS/PSIBS.
What is the dividend allowance?
£1000
What are the rates for dividend tax above the dividend allowance?
8.75%
33.75%
39.35%
What is the tax rate for CGT on shares
10%
20%
Can be both if straddling
What may also be payable on shares?
Stamp duty or stamp duty reserved tax
How are buy to let’s taxed?
Charged on profits calculated using standard accounting.
Tax year till 31st March
Tax paid under self assement
Losses carried forward or, in some cases, used for losses in the same year.
How is income for property income calculated?
All UK property is pooled together regardless of type of lease or whether it is furnished or not.
The same rules apply for overseas property, but it is kept in a separate pool.
What type of income is property income.
Investment not earned
What are the deductions on property income?
Repairs and maintenance. (Not improvments)
20% effective rate deduction for interest payable on loan or overdraft for property.
Premiums for insuring
Profesional charges
Gas and electricity paid by the landlord
Various other costs
Replacement allowance (furniture, etc.)
Why can it be beneficial to a landlord to provide substantial services?
Their property becomes a trade giving advantages such as.
Greater ability to offset losses
Making tax relieved pension contributions.
Claiming capital gains tax rollover or holdover relief
Inheritance tax relief
What would constitute substantial services?
Having laundry, cleaning, and one meal a day.
What is added to stamp duty land tax for buy to let?
3% sur charge for second properties even on those that would escape. SDLT.
What is a primium when talking about property?
When a NEW tenant pays a lump sum on a lease upfront and an agreement to pay rent monthly or quarterly during the term of the lease.
What are the rules for premiums on the lease of property?
Less than 2 years treated as rent.
More than 50 years, treated as a payment for a disposal of property. (CGT for the landlord)
2 to 50 years split as rent and capital sum.
How is the spilt handeld for lease between 2 and 50 years?
The income portion reduced by one 50th for each year besides the first.
The remainder become CGT.
Due to sur charge on property, what can be done from a planning perspective?
Offset the residential property gain first.
What are the advantages of furnished holiday letting?
Income is treated as relevant income for pension purposes.
Still has 8% sur charge, but rollover, holdover, and business asset disposal relief may be available.
What does rollover relief allow?
The gain to be rolled over against the cost of a new business asset bought 1 year before or 3 years after the disposal.
What is holdover relief?
Relief that can be applied for in respect of furnished holiday lets or trade properties that are gifted. CGT can be held over until the donor disposes of the property.
Diacribe business asset disposal?
Allows 10% tax rate instead of 20% for higher or additional rate tax payers disposing of or part disposing of thier business.
Upto 1m lifetime gains
What are the rules to qualify as a furnished holiday let?
Situated in the UK or EEA
Must be furnished
Must be let on a commercial basis (no need to be holiday)
Must be available for the public 210 days and let 105.
Max let time 155 days per let.
If you rent part of your main residence, what can you claim?
Rent room relief
What does rent room relief provide?
Income tax relief on the property as long as the receipts don’t go over £7500.
If receipts go over £7500 what can a landlord do in regards to room relief?
Either be taxed in the normal way (income less expenses) but without the relief.
Take the relief but can not claim back expenses
How is room relief handled with joint ownership?
It is split in half between the owners.
What happens if someone lets out part of their property in a self-contained part?
They may pay CGT on this part.
On the lowest part of either
£40000
The amount of the capital gains that is expemt
