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Af1 > Direct Investments > Flashcards

Direct Investments Flashcards

1
Q

What types of cash investments are paid gross

A

Bank/building society interest and nS&I

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2
Q

What is the starting rate of 0%

A

Applies to the first £5,000 of taxable income of from savings income

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3
Q

What is the personal savings allowance

A

£1,000 for basic rate tax payers
£500 for higher rate tax payers
None for additional rate tax payers

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4
Q

What is the rate of tax for the personal savings allowance

A

0%

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5
Q

What tax is a cash bonus from a building society demutualisation liable for

A

Disposal for cgt

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6
Q

What tax is free shares from a building society liable to

A

Neither income tax or cgt but the disposal will be liable to cgt

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7
Q

How old do you have to be to open an NS&I investment account

A

16 but it can be opened for a child under 16

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8
Q

What are the withdrawal penalties on an investment account

A

Nil

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9
Q

Is income from an NSI investment account taxable

A

Yes but it is paid gross

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10
Q

What type of bank accounts are available from NS&I

A

Investment account and direct saver

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11
Q

What is the maximum holding in an NS&I savings certificate

A

£15,000 per individual per issue

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12
Q

What was the benefit of fixed interest issues from NS&I

A

Free of all taxes

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13
Q

What taxes we’re index linked issues free from

A

Income and cgt

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14
Q

What terms did index linked savings certificates offer

A

3&5 years

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15
Q

How often is interest distributed from an NS&I income bond

A

Monthly

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16
Q

What are the minimum and maximum investments for a guaranteed income or growth bond

A

Min £500 max £10,000 (£20,000 joint)

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17
Q

What terms are available from guaranteed income and growth bonds

A

1 & 3 years

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18
Q

When is interest credited from a Direct ISA

A

On 5th April

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19
Q

What is a Direct ISA

A

CAT standard cash ISA

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20
Q

What are examples of fixed interest securities

A

Gilts
Corporate bonds
Local authority bonds
Permanent interest bearing shares

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21
Q

What tax are individuals not liable to if they invest in gilts or qualifying corporate bonds

A

CGT

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22
Q

Can a loss on a gilt be deducted against gains

A

No

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23
Q

How is income from fixed interest securities taxed

A

As savings income and the PSA can be claimed

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24
Q

How often is interest from a gilt paid

A

Fixed rate twice yearly

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25
Q

Is the income from a gilt taxable

A

Yes it is paid gross but you can elect to have the basic rate of tax deducted

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26
Q

How do you sell a gilt

A

On the stock exchange

27
Q

Is interest from a corporate bond taxable

A

Yes but it is paid gross

28
Q

Where can you buy and sell corporate bonds

A

On the stock exchange

29
Q

What is a discounted security

A

Where the issue price is less than the amount payable on redemption by 15%

30
Q

How is the interest from a local authority bond paid

A

Gross but it is taxable

31
Q

Is a local authority bond liable to capital gains tax

A

No as it is a qualifying corporate bond

32
Q

When a building society demutualises what do PIBs become

A

Perpetual subordinated bonds

33
Q

Who issues PIBS

A

Building societies - no longer issued but existing ones still traded

34
Q

Is the interest from a PIBs taxable

A

Yes but it is paid gross

35
Q

Are PIBs liable to CGT

A

No

36
Q

Do PIBs have to be redeemed?

A

No they are undated which is why the fixed interest is higher

37
Q

What is a stock dividend

A

When a shareholder is offered new shares instead of cash dividends

38
Q

What is the acquisition basis of a stock dividend

A

The amount of the cash dividend

39
Q

How are overseas dividends treated for tax

A

Usually paid after deduction of withholding tax which can be offset against UK income tax

40
Q

What is an investment trust

A

A limited company that invests shareholders money in other stocks and shares

41
Q

How is income from a let property treated

A

As investment income

42
Q

Can let property income be treated as relevant earnings for pension contributions

A

No unless furnished holiday let

43
Q

What is the property allowance

A

Income under £1,000 not taxed

44
Q

What are deductible expenses from property let income

A 
Repairs and maintenance
Interest paid on loans/overdrafts for purpose of property let 
Legal fees
Professional charges 
Building insurance 
Water rates
Council tax 
Cost of services paid by landlord
45
Q

How are finance costs in relation to a residential property being restricted

A

To a basic rate tax reduction rather than an allowable deduction.
= 20% of costs payable will be reduced from tax liability

46
Q

What capital allowances are allowed for property let income

A

Plant and machinery installed in let property or used to maintain it
Furnitures and other equipment in commercial property
Annual investment allowance up to £1m
Expenditure in excess of £1m qualifies for 18% writing down allowance
Replacement furniture relief

47
Q

How does replacement furniture relief work

A

Cost of replacing plus cost of disposal of old minus the selling proceeds of the old one

48
Q

What is the premium on short leases

A

Where a lease is granted for less than 50 years the premium is treated as rent

49
Q

What is a reverse premium

A

A sum paid by the landlord to induce a potential tenant to take out a lease

50
Q

Who is taxable on a reverse premium

A

The tenant

51
Q

Can a reverse premium be deducted from landlords letting income

A

No but it is an allowable enhancement expenditure on disposal

52
Q

How is the amount taxable on a short lease reduced

A

By 1/50th for each year of the lease other than the 1st year

53
Q

Can property losses be carried forward

A

Yes carried forward automatically of set against future property letting income but cannot be offset against other income

54
Q

How can property trading income be applied

A

When a landlord provides substantial services in connection with the lettings

55
Q

Hat are the benefits of property trading income

A

More scope for losses
Relevant earnings for pensions
Cgt rollover and holdover relief

56
Q

Is income form overseas property chargeable

A

Yes to income tax but is shown separately on a return

57
Q

What is the cgt situation if part of a home is let

A

Any part of a home let is not covered by the main residence exemption

58
Q

What is the special exemption for a gain arising on a main residence that was wholly let

A

The gain on that part is reduced by the lowest of
£40,000
Amount of gain exempt because house is main residence
Gain attributable to the jet part of period of letting

59
Q

What is rent a room relief

A

For people who let part of their main residence - up to £7500 tax free

60
Q

What is the rules when letting part of a main residence income is above £7500

A

Can choose either
Normal basis - income less expenditure
Taxed on amount by which gross receipts exceed £7500 with no expenses

61
Q

What are the qualifying rules for a furnished holiday let to obtain certain tax advantages

A

Furnished and let on commercial basis
Available for letting at least 210 days in tax year
Let for at least 105 days
Not let on a continuous basis for more than 155 days in a tax year

62
Q

What are the tax advantages for a qualifying holiday let

A

Income is relevant earnings for pension contributions

Cgt rollover relief, holdover relief and entrepreneurs relief available on disposal

63
Q

What taxes are woodlands liable to

A

Profits are exempt from income tax
Iht can be postponed as long as they have been owned for 5 years
Cgt exempt

Af1 (18 decks)

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