Direct Investments Flashcards
What types of cash investments are paid gross
Bank/building society interest and nS&I
What is the starting rate of 0%
Applies to the first £5,000 of taxable income of from savings income
What is the personal savings allowance
£1,000 for basic rate tax payers
£500 for higher rate tax payers
None for additional rate tax payers
What is the rate of tax for the personal savings allowance
0%
What tax is a cash bonus from a building society demutualisation liable for
Disposal for cgt
What tax is free shares from a building society liable to
Neither income tax or cgt but the disposal will be liable to cgt
How old do you have to be to open an NS&I investment account
16 but it can be opened for a child under 16
What are the withdrawal penalties on an investment account
Nil
Is income from an NSI investment account taxable
Yes but it is paid gross
What type of bank accounts are available from NS&I
Investment account and direct saver
What is the maximum holding in an NS&I savings certificate
£15,000 per individual per issue
What was the benefit of fixed interest issues from NS&I
Free of all taxes
What taxes we’re index linked issues free from
Income and cgt
What terms did index linked savings certificates offer
3&5 years
How often is interest distributed from an NS&I income bond
Monthly
What are the minimum and maximum investments for a guaranteed income or growth bond
Min £500 max £10,000 (£20,000 joint)
What terms are available from guaranteed income and growth bonds
1 & 3 years
When is interest credited from a Direct ISA
On 5th April
What is a Direct ISA
CAT standard cash ISA
What are examples of fixed interest securities
Gilts
Corporate bonds
Local authority bonds
Permanent interest bearing shares
What tax are individuals not liable to if they invest in gilts or qualifying corporate bonds
CGT
Can a loss on a gilt be deducted against gains
No
How is income from fixed interest securities taxed
As savings income and the PSA can be claimed
How often is interest from a gilt paid
Fixed rate twice yearly
Is the income from a gilt taxable
Yes it is paid gross but you can elect to have the basic rate of tax deducted
How do you sell a gilt
On the stock exchange
Is interest from a corporate bond taxable
Yes but it is paid gross
Where can you buy and sell corporate bonds
On the stock exchange
What is a discounted security
Where the issue price is less than the amount payable on redemption by 15%
How is the interest from a local authority bond paid
Gross but it is taxable
Is a local authority bond liable to capital gains tax
No as it is a qualifying corporate bond
When a building society demutualises what do PIBs become
Perpetual subordinated bonds
Who issues PIBS
Building societies - no longer issued but existing ones still traded
Is the interest from a PIBs taxable
Yes but it is paid gross
Are PIBs liable to CGT
No
Do PIBs have to be redeemed?
No they are undated which is why the fixed interest is higher
What is a stock dividend
When a shareholder is offered new shares instead of cash dividends
What is the acquisition basis of a stock dividend
The amount of the cash dividend
How are overseas dividends treated for tax
Usually paid after deduction of withholding tax which can be offset against UK income tax
What is an investment trust
A limited company that invests shareholders money in other stocks and shares
How is income from a let property treated
As investment income
Can let property income be treated as relevant earnings for pension contributions
No unless furnished holiday let
What is the property allowance
Income under £1,000 not taxed
What are deductible expenses from property let income
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
How are finance costs in relation to a residential property being restricted
To a basic rate tax reduction rather than an allowable deduction.
= 20% of costs payable will be reduced from tax liability
What capital allowances are allowed for property let income
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
How does replacement furniture relief work
Cost of replacing plus cost of disposal of old minus the selling proceeds of the old one
What is the premium on short leases
Where a lease is granted for less than 50 years the premium is treated as rent
What is a reverse premium
A sum paid by the landlord to induce a potential tenant to take out a lease
Who is taxable on a reverse premium
The tenant
Can a reverse premium be deducted from landlords letting income
No but it is an allowable enhancement expenditure on disposal
How is the amount taxable on a short lease reduced
By 1/50th for each year of the lease other than the 1st year
Can property losses be carried forward
Yes carried forward automatically of set against future property letting income but cannot be offset against other income
How can property trading income be applied
When a landlord provides substantial services in connection with the lettings
Hat are the benefits of property trading income
More scope for losses
Relevant earnings for pensions
Cgt rollover and holdover relief
Is income form overseas property chargeable
Yes to income tax but is shown separately on a return
What is the cgt situation if part of a home is let
Any part of a home let is not covered by the main residence exemption
What is the special exemption for a gain arising on a main residence that was wholly let
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
What is rent a room relief
For people who let part of their main residence - up to £7500 tax free
What is the rules when letting part of a main residence income is above £7500
Can choose either
Normal basis - income less expenditure
Taxed on amount by which gross receipts exceed £7500 with no expenses
What are the qualifying rules for a furnished holiday let to obtain certain tax advantages
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
What are the tax advantages for a qualifying holiday let
Income is relevant earnings for pension contributions
Cgt rollover relief, holdover relief and entrepreneurs relief available on disposal
What taxes are woodlands liable to
Profits are exempt from income tax
Iht can be postponed as long as they have been owned for 5 years
Cgt exempt
