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CeMAP Unit 1 > Topic 9 Tax Wrappers > Flashcards

Topic 9 Tax Wrappers Flashcards

1
Q

What is a tax wrapper?

A

Is a tax shelter that changes how an investment is taxed

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2
Q

What are the 2 ways tax is charged on an investment?

A
  1. When funds are invested
  2. When funds are paid out
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3
Q

What is a Individual Savings Account (ISA)?

A

Introduced in 1999 to develop a savings habit in the population

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4
Q

What are the main types of ISA’s

A
  • Cash ISA
  • Stocks and Shares ISA
  • Initiate Finance ISA
  • Lifetime ISA
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5
Q

What type of ISA covers these:

  • Shares & Corporate Bonds issued by companies anywhere is the world
  • Gilts & Stocks issued by governments in the EEA
  • Unit Trusts, OEIC & Investment Trusts
  • Life assurance policies on life of sole ISA investor
  • Units in stakeholder medium term investment product
A

Stocks and Shares ISA’s

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6
Q

What is the maximum number of days shares in an all-employee savings-related share option scheme (SAYE) need to be to qualify as a Stocks & Shares ISA

A

90 days

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7
Q

What type of ISA covers these:

  • Savings in bank or building deposit account
  • (Money Making Instruments) units in Unit Trust & OEIC
  • Stakeholder cash deposit products
A

Cash ISA

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8
Q

What type of ISA covers these:

  • Peer to Peer Investing
  • Long term Asset Funds
A

Innovative Finance ISA

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9
Q

What type of ISA covers these:

  • Used to buy first home
  • Save for retirement life
A

Lifetime ISA

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10
Q

A Help to Buy ISA has been replaced by a Lifetime ISA.

True or False?

A

True

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11
Q

What is the earliest age a person can buy either a Stocks & Shares , Lifetime or Innovative Finance ISA?

A

18

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12
Q

What is the earliest age a person can buy a Cash ISA?

A

16

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13
Q

An ISA can be held in joint names.

True or False?

A

False it can only be held in sole name

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14
Q

A person must be resident in the UK to qualify for an ISA?

True or False?

A

True

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15
Q

What are subscription Limits ISA’s?

A

The maximum that can be saved each tax year

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16
Q

What is the maximum subscription limit for an ISA’S?

A

£20,000 per tax year across all ISA’s (not in each)

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17
Q

What is the maximum subscription limit for a lifetime ISA?

A

£4,000 per year

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18
Q

What is an Additional Permitted Subscription (APS)?

A

Allows a person to make an extra payment into a deceased persons ISA

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19
Q

Is this statement correct?

Additional Permitted Subscription (APS) allows a payment into the value of the deceased ISA’s holdings

A

Yes this is correct

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20
Q

The right to make an Additional Permitted Subscription (APS) is valid until the earlier of what?

A
  • 180 days after admin of the estate
  • Closure of the account
  • 3rd anniversary of the deceased ISA holder death
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21
Q

Why is APS different for Stocks & Shares ISA’S?

A

The limit is only 180 days after the admin of the estate

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22
Q

ISA funds can be transferred between different types of ISA’S without contravening ISA limits.

True or False

A

True

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23
Q

Do ISA providers have to provide a facility for investors to replenish funds withdrawn from an ISA?

A

No they don’t have to but can if they wish

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24
Q

What type of tax are ISA holders exempt from?

A

Income Tax & Capital Gains Tax

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25
Q

What is a Help to Buy ISA?

A

Was a ISA open to people looking to buy their first home between December 2015 & November 2019

26
Q

When must a Help to Buy ISA be used to purchase a house?

A

1st December 2030

27
Q

What is the maximum per month that can be paid into a Help to Buy ISA?

A

£200

28
Q

What is the minimum & maximum bonus size of a Help to Buy ISA?

A

Minimum £400

Maximum £3,000

29
Q

What is the maximum property value the Help to Buy ISA is available to in London?

A

£450,000

30
Q

What is the maximum property value the Help to Buy ISA is available to elsewhere in the UK?

A

£250,000

31
Q

When is the bonus paid on a Help to Buy ISA?

A

When the home purchase is completed

32
Q

Are Help to Buy ISA savings payments part of an investors ISA allowance or in addition to it?

A

They are part of it not an addition

33
Q

What is the purpose of a Lifetime ISA?

A

To encourage younger people to save for their first home or for retirement

34
Q

What is the maximum home value for a Lifetime ISA?

A

£450,000

35
Q

From what ages can a Lifetime ISA be opened?

A

18-40

36
Q

What percentage do the government pay on a bonuses before the age of 50 on Lifetime ISA’s?

A

25%

37
Q

When is the bonus paid on a Lifetime ISA?

A

Monthly

38
Q

What is the earliest age a person can use a lifetime ISA for retirement purposes?

A

60

39
Q

What happens if a Lifetime ISA holder is terminally ill?

A

They can withdraw the savings and the bonus

40
Q

What percentage of penalty does a Lifetime ISA holder receive if they use savings for anything other than a house purchase or savings?

A

25%

41
Q

Is this statement true?

A bonus from a Help to Buy ISA & a Lifetime ISA can be used to towards a house purchase

A

False a bonus is only useable from one of products

42
Q

What did a Junior ISA replace in November 2011?

A

Child Trust Fund

43
Q

True or False

A child can have both a Junior ISA & Child Trust Fund

A

False they can only have one or the other

44
Q

At what age can a child manage their own Junior ISA?

A

16

45
Q

What age can the funds be accessed on a Junior ISA?

A

18

46
Q

What is the annual limit of a Child Trust Fund?

A

£9,000

47
Q

What are the 3 types of Child Trust Fund?

A
  1. Deposit savings accounts
  2. Share accounts
  3. Stakeholder CTF
48
Q

What is the maximum annual charge allowed on a Stakeholder Child Trust Fund?

A

1.5%

49
Q

What is a Venture Capital Trust (VCT)?

A

Is a company who’s shares are listed on the Stock Exchange

50
Q

What does a Venture Capital Trust (VCT) invest in?

A

Various companies on the stock exchange

51
Q

What are the tax benefits of Venture Capital Trusts

A
  • Income tax relief up to 30% of on investment up to £200K per year
  • Dividends from VCT from £200K are tax free
  • Capital gains are tax exempt from CGT
52
Q

What is a Enterprise Investment Scheme?

A

Is a scheme that allows tax relief on direct investment in companies

53
Q

What are the tax benefits of Enterprise Investment Schemes?

A
  • 30% tax relief on investments up to 1 million
  • Reinvested gains are exempt from CGT
  • CG from EIS scheme are exempt from CGT provide they are held for 3 years
54
Q

What is the maximum amount an investment in a Knowledge investment company can receive 30% tax relief on?

A

2 Million

55
Q

What is the Seed Enterprise Investment Scheme (SEIS)

A

A scheme that offers even higher tax relief to small start up companies

56
Q

When is the latest date a person can pay in to a Help to Buy ISA?

A

30th November 2029

57
Q

Can a Child Trust Fund be transferred to a Junior ISA?

A

Yes they can be on request

58
Q

Is there a monthly savings limit on a Lifetime ISA?

A

No but savings are only allowed up to the maximum savings limit of £4,000

59
Q

What percentage withdrawal fee will be charged if somebody transfers out of a lifetime ISA to a different ISA before age 60

A

25%

60
Q

How much was the government bonus on a Help to Buy ISA?

A

25% on the amount saved + interest provided balance of £1,600 was saved in the account

61
Q

Enterprise Investment Schemes (EIS) are investments in companies that have what features?

A
  • Investment in smaller high risk companies
  • Offers tax relief

CeMAP Unit 1 (18 decks)

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