Other Facts Flashcards
Outline the steps you would take to calculate Alex’s income tax calculation (4)
Up to personal allowance (12,570) @ 0%
Take basic rate band (£37,700) but you extend the br band to include Alex pension conts (£4,500)
New basic rate band is £42,200
Remaining income (£35,230) @ 40%
Then add up the savings (PSA) and dividend income (DA) and tax accordingly as per Alex’ allowances
Roughly what would Alex’s disposable net income be, above his current expenditure levels, should he reduce his pay to £70,000?
£1,183
If Tanya’s personal representatives sell assets during the administration period, will CGT be payable?
Yes, they have this years £6,000 CGT exemption, as well as the next two years exemption (£3,000)
Will transferring Alex the unit trust be liable to CGT? (Giving to Alex post administration of estate)
No
What is the main difference between “additional info” Q’s and “factors” style questions.
Additional info questions are concerned with things you DON’T currently know, whereas factors questions can be both what you DO know and what you DON’T know
What are the 6 clear stages of the advice process (for Alex)
- Establish client + advisor relationship
- Complete full fact find
- Establish current and future income and expenditure requirements
- Establish capital requirements
- Establish ATR and CFL
- Establish appropriate products
The latter stages are about presenting the products and evaluating said recommendations
What options does Alex have with the receipt of the £260,000 DIS payment?(5)
Keep an appropriate amount in an emergency fund to help cover 6-12 months worth of planned expenditure (keep FSCS limits in mind)
Allocate money for short term requirements such as child care and funeral costs
Make full use of his ISA allowance and potentially JISA’s for the kids (£9,000 each)
Use tax free NS&I products, which could be used for savings vehicles for the kids but also to use as an emergency fund too
Consider using an investment bond to help alleviate IHT as well as 5% tax deferred income withdrawals
Benefits of Alex using an investment platform for his new investments (6)
Ease of administration, easy access to view and monitor his portfolio
Platforms offer a wide range of investments and wrappers (JISA for kids)
Alex could have access to DFM’s model portfolios to benefit from professional management
Platforms offer a cheaper share class, as well as usually inc and acc units
Platforms are cheaper than holding investments directly with the provider
Consolidated tax reporting
Automated rebalancing
What sort of format should a “comment on” question take?
Here’s what I’ve seen/know but here’s what I don’t know, and here are the implications
Additional information you would need from Alex before he takes up his employers offer of a reduced salary (12 marks)
Type of childcare he wants for the children
Expected expenditure on childcare
Is Alex looking to provide for children’s university fees
Term of children’s dependency
Level of emergency fund required
Impact on protection policies sponsored by employer
Timescale of compassionate leave offered
Level of income needed to maintain standard of living
Does he have any other family or friends to support with childcare
Does the offer come with WFH options
Willingness to use own investments to cover childcare
Can Alex increase pension contributions
State pension forecast
5 risks of relying solely on cash flow modelling
Assumptions may prove to be incorrect
Input information can swiftly become outdated
Personal circumstances can quickly change which will need reflecting
Does not account for future tax rule changes
Does not consider liquidity of assets
What is a Tax Free Childcare Account, and how may it help Alex pay for childcare costs?
As Cameron is under 11, Alex could set up a Tax Free Childcare Account and for every £8 he pays into the account the government will pay £2 to the same account.
Though do note the provider must be Ofsted registered and Cameron will become ineligible in September on his 11th birthday.
Will Alex inherit Tanya’s Personal Savings and Dividend Allowances
No, only the ISA allowance via APS
When claiming APS for Alex, he can obtain the value of the ISA on the date of Tanya’s death or value of the date of probate. Whichever value is higher he can use.
Can Alex claim child benefit?
No, as he earns over £60,000. Even with reduced salary he can’t claim CB
