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ICAS - Tax > Module 7: Investments and Pensions > Flashcards

Module 7: Investments and Pensions Flashcards

1
Q

ISAs can be in (3)

A

Cash
Stocks
Shares

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2
Q

Interest, dividends and capital gains through ISAs are

A

Tax free

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3
Q

Annual limits for ISAs

A

£20,000
16-17 years old = £20,000 but only in cash ISAs
<16 years old = £4260, no withdrawals before 18th birthday

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4
Q

Help to buy ISA saving

A

£200 per month

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5
Q

Bonus on help to buy ISA

A

25% on purchase of first residential property (limited to max bonus of £3000)

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6
Q

Bonus on help to buy ISA only payable when

A

Property being purchased costs < £450,000 in London and < £250,000 elsewhere

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7
Q

Help to buy ISA only available until

A

November 2019

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8
Q

LISA can be opened by UK resident individuals aged

A

18-39

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9
Q

LISA - annual saving

A

Up to £4000 pa until aged 50

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10
Q

Savings in LISA count towards

A

Annual ISA limit of £20,000

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11
Q

Bonus paid

A

25% paid by government on total amount paid into LISA excluding interest/ growth

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12
Q

Withdrawal of LISA

A

From 60th birthday or after 1 year if being used to purchase first residential property < £450,000 anywhere

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13
Q

Enterprise investment scheme cannot

A

Reduce IT liability to a negative number

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14
Q

If shares sold within 3 years EIS

A

IT reducer is clawed back - increases tax due

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15
Q

Amount of EIS clawed back

A

Sale proceeds x initial rate of relief received

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16
Q

If the shares in EIS/ VCT are given away (other than to spouse/ partner or on death)

A

Full tax reducer is clawed back

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17
Q

Capital loss on disposal of shares EIS

A

Can be set off against gains OR set against net income in year of disposal or PY

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18
Q

When calculating loss on disposal of shares

A

(Proceeds less cost) Cost is reduced by amount of any EIS tax reducer claimed on investment

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19
Q

Venture capital trust

A

Quoted company approved by HMRC which invests in unquoted shares

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20
Q

Venture capital trusts (VCTs) IT clawback

A

If shares sold within 5 years
Clawback same as EIS:
Sale proceeds x initial rate of relief received

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21
Q

VCT income tax relief fully withdrawn if

A

VCT loses its approved status within 5 years after issuing eligible shares to the investor

22
Q

Capital gains arising from disposal of VCT shares

A

Exempt from tax regardless of length of period of ownership

23
Q

Dividends received by an individual in respect of ordinary shares in a VCT are exempt from income tax provided (3):

A
  • company was a VCT when the individual acquired their shares
  • dividend paid out of profits which accrued to the company in an accounting period after its approval as a VCT
  • shares in respect of which the dividend is paid were acquired by the investor within permitted max of £200k
24
Q

Maximum investment qualifying for tax reducer VCT

A

£200,000 pa

25
Q

Maximum investment qualifying for tax reducer EIS

A

£1m pa

26
Q

Relief on dividends and CGT relief VCT given on

A

First £200,000 ordinary shares acquired in each tax year (doesn’t have to be VCT)

27
Q

30% income tax reducer on investment VCT given

A

First £200,000 NEW VCT ordinary shares subscribed for each tax year

28
Q

Occupational (employers) pension schemes (2)

A
  • final salary

- defined contribution

29
Q

Final salary =

A

Eventual pension income is determined by final salary rather than the amounts paid in

30
Q

Defined contribution

A

Eventual pension income is determined by how much has been paid in

31
Q

Maximum gross contribution individual can make which will attract tax relief is

A

Higher of
£3,600 or
100% of UK earnings

32
Q

UK earnings = (3)

A
  • employment income
  • trading income
  • income from furnished holiday lettings
33
Q

Occupational schemes relief

A

Employer deducts gross pension contributions from individual’s employment income before operating PAYE. Appropriate rate of relief (20%/40%/45%) given at source, reducing PAYE paid.

34
Q

Personal pension schemes relief

A

Individual makes contribution net of basic rate tax. Remaining 20% paid by HMRC direct to pension provider.

35
Q

Personal pension scheme if higher/ additional rate band

A

Extend the basic rate (and higher if applicable) by the gross pension contribution

36
Q

Employer contributions (3)

A
  • exempt benefits and not limited
  • tax deductible as a trading expense
  • count towards the annual allowance
37
Q

Limit on amount that can be paid into approved pension scheme

A

No limit

38
Q

Annual allowance pensions purpose

A

Limits the tax relief available on total gross contributions

39
Q

Annual allowance pensions =

A

£40,000

Reduced by £1 for every £2 net income >£150,000 to minimum annual allowance of £10,000

Individual with net income >£210,000 has min allowance of £10,000

40
Q

Unused annual allowance

A

Can be carried forward for three years under FIFO basis

41
Q

Excess pension contributions

A

When individual’s contributions in a tax year exceed their annual allowance

42
Q

Excess pension contributions treatment

A

Excess is charged to tax as if it is the taxpayers top slice of income (could be 20%/40%/45%). No NIC and not considered to be earnings.

43
Q

Withdrawal from pension fund (% tax free)

A

25%

44
Q

Regular pension income treated as

A

Non savings income

45
Q

Remaining value of withdrawal taxable at

A

Marginal rate of income tax

46
Q

Once money is withdrawn income tax on excess in pension fund above the lifetime allowance - lump sum

A

55% income tax

47
Q

Once money is withdrawn income tax on excess in pension fund above the lifetime allowance - used to purchase pension/ paid as cash withdrawal

A

25% income tax

48
Q

Personal pension / money purchase pension valued by

A

Totalling the market value of the assets

49
Q

Valuing final salary pension

A

20 x annual pension benefit payable + tax free lump sum payable

50
Q

Enterprise investment scheme qualifying shares

A

In Unquoted trading companies

ICAS - Tax (15 decks)

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