Philanthropy and ISAs Flashcards
What is a fiduciary relationship /responsibilities for wealth managers?
A fiduciary relationship is one in which a person places special trust, confidence and reliance in a person. Fiduciaries must be open and fair and act with loyalty and honesty. Agent and principal, lawyer and client, banker and customer etc. Act in good faith, no conflicts of interest and not profiting form trust placed in them.
Define a flat yield curve?
Little difference in yield for bonds at short end and long end of the curve. (Steep yield curve =long dated bonds yield significantly more)
What is the maximum a non-income tax payer can pay into a pension?
£2880 net which can be grossed up with tax releif from HMRC (/divided by 0.8) to create a figure of £3600.
What is the lifetime allowance? What are the tax charges over?
What is annual allowance?
Lifetime allowance is £1m
25% tax if drawn as income
55% tax if paid as lump sum.
£40k is annual allowance.(reduced if you earn over £150k down to minimum £10k)
What is the ISA limit? The 4 types of ISA?Junior ISA limit?
You can save tax free up to £20,000 in one of four types of ISA. Cash, Stocks and Shares, Innovative Finance, LISA. A junior ISA limit is £4,128 (between cash and share types)
Who can open an ISA? What are the charges for opening one?
16 or over for cash ISA
18 or over for Stock and shares and innovative finance ISA.
Must be resident in the UK -
A crown servant or civil partner if not living in UK.
Charges low depending on provider.
What are the key LISA points?
What is an innovative finance ISA?
Of the £20,000 a year ISA limit only £4000 can go towards the LISA each year.
Over 18 to 40 to open 50 to Save and 60 to access.
25% bonus up to £1000 a year UNTIL your 50.
5% charge to withdraw and loss of government bonus unless over 60 OR if buying a first home under £450k. (or terminally ill less than 12 months to live)
£33,000 max bonus if you pay in from age 18 up to 50.
IF - P2P and Crowdfunding
What can be held in an ISA?
Tax situation on dividends.
Qualifying shares Certain Investment Trusts Depository Interests Government securities (not property and not derivatives) UCITS and Non UCITS Funds Cash and bonds (min 5 years duration) Claim 20% tax at source on qualifying bonds/bond funds No CGT and no Income Tax. Cannot reclaim 10% tax credit on dividends.
Who is a SIPP aimed at? What is a SIPP? Who is involved in one? Who provides one? What are the charges?
Aimed at sophisticated Investors
Pension wrapper holds investments in a tax efficient manner.
Has scheme provider, administrator, trustee, pension adviser and investment manager
Provided by banks, insurance companies, building societies and unit trusts.
Charges between £100 - £1000 plus admin and dealing fees.
They can borrow up to 50% of its value to purchase commercial property.
Can’t hold esoteric assets such as cars, art or wine or direct residential property.
What is a VCT? What are the benefits of a VCT? What type of shares must they have been?
- A high risk company listed on the LSE which invests in a range of smaller unlisted companies whose shares aren’t listed. Similar to an Investment Trust. Free from corperation tax on gain subject to HMRC approval.
- Must be 18 or over for tax benefits to be claimed.
- IF HMRC approves they are exempt from corporation tax and gains arising from disposals of their investments within the structure.
- Income tax relief of 30% up to £200k if held for five years. Shares must be ordinary and not carry preferential rights.
- Exempt from income tax on dividends
- Only available to individuals over 18
- Disposal relief so CGT free for shares worth less than £200k in any tax year. Above this value is chargable to CGT.
- Can trade at a discount/premium to NAV. Supply and demand.
- Details of disposals must be disclosed on CG1 and CG 2 of your tax return.
How can mortgage interest be offset against Buy To Let property income? Now vs 2020
Right now mortgage interest can be offset against profit in full for BTL property income. From 2020 this will be replaced with a 20% tax credit.
2020 - 20% tax credit
2019 - 25% offset
2018 - 50% offset
2017 - 75% from this year
eg. Your interest is £6000 and your income is £20,000. Right now you pay tax on £14,000 @ 45% = £6,300.
In 2020 you get a credit to deduct from the total (0.2 x 6000= £1,200) A HRT pays 45% on £20,000 which is £9,000 - £1,200 = £7,800
What is a help to buy ISA? Max contribution Monthly and first year? How long can you save for? what is the age to open one? Property value?
Age 16 and over.
£1k account opening max (£250 bonus) and £200 a month there after. £50 bonus = £850 in first year.
Can be held open indefinitely.
£3k cap on benefits.
London property up to £450k and elsewhere up to £250k.
Junior ISA limit?
£4,260 a year.
18 or under to open. Can take charge at 16 but only access at 18.
Cash and stocks and shares
Has to be opened by a parent or guardian.
Intestacy rules?
First £250,000 passes to partner/wife. HALF of the remaining passes to the wife also. The rest goes to the children. If no children then to grandchildren. It will go to the parents if there are no DESCENDANTS.
No estate means it passes to the crown. This is known as bona vacantia.
Key reason for suitability?
Assess whether a client can financially bear the risks of an investment strategy.
What is NS&I
National savings and investments.
An agency of the treasury
Premium bonds 1.4%
Guaranteed Income Bonds 1.45% (1 year) 1.92% (3 year tie up) paid monthly to your bank account.
Guaranteed Growth Bond - Plus 0.05% on each
TAX FREE prizes and added annually to bond.
