Unit 1 Topic 9- Tax wrappers Flashcards
What is a tax wrapper?
Tax on investments are usually charged at two stages of an investment’s live:- while the funds are invested- when the funds are drawn or income is paid outUsing a tax wrapper such, such as an ISA, changes the way an investor is taxed on the underlying investment.
List out the types of ISAs.
Stocks and shares ISACash ISAInnovative finance ISA
What can a stocks and shares ISA include?
- shares and corporate bonds issued by companies listed on a recognised stock exchange anywhere in the world.- gilt-edged securities and similar stocks issued by governments of countries in the EEA- UK-authorised unit trusts and OEICs- UK-listed investment trusts- life assurance policies on the sole life of the ISA investor- units in a stakeholder medium-term investment product- shares acquired in the previous 90 days from an all-employee savings-related share option scheme (SAYE).
What can a cash ISA include?
- Bank and building society deposit accounts
- Units or shares in UK
-authorised unit trusts and OEICs that are money-market schemes - Stakeholder cash deposit products
What are the eligibility rules for ISAs?
- Minimum age for stocks and shares or innovative finance ISA is 18 years; a cash ISA can be opened by anyone aged 16 or over- An ISA investor must be generally resident in the UK for tax purposes- An ISA can only be held in a single name, ie joint accounts are not permitted
What is the ISA subscription limit for 2023/24?
£20,000
What happens to the ISA holdings of a deceased investor?
Holdings are designed as a ‘continuing account of a designated investor’ and remain so until the earlier of:
- administration of the estate;
- closure of the account; or
- third anniversary of death.
What is an additional permitted subscription (APS)?
- Applies when an individual’s spouse or civil partner dies.
- It allows the surviving spouse/civil partner to make an additional ISA subscription to the value of the deceased’s ISA holdings.
- Right to make cash APS applied for 3 years from the date that the person died, or 180 days after administration of the estate is complete.
- Stocks and shares as above (only 180 days).
How are ISAs taxed on income or capital gains?
Investors are exempt from income tax and capital gains tax on their ISA investments.If a unit trust is held within an ISA there is no liability to CGT.
What is a Help-to-Buy ISA?
A scheme open to those aged 16 or over to help those saving for their first UK home by adding a bonus to any savings they make.Anyone who has opened an account by 30 Nov 2019 will be able to use funds invested towards purchase of a first home by 1 December 2030.Savings into a Help-to-Buy ISA form part of the annual ISA allowance, rather than being in addition to it.
What are the eligibility and payout figures of a Help-to-Buy ISA?
- An initial deposit of £1,200 and monthly savings of £1 - £200.- Each £200 paid in will attract a bonus payment of £50, subject to the ISA being worth at least £1,600 when funds are withdrawn for home purchase.- Minimum bonus size of £400 and max of £3000.- The bonus is available on purchases of up to £450,000 in London and £250,000 elsewhere in the UK and is paid when the home purchase is completed.
What is a lifetime ISA?
A lifetime ISA was introduced from 6 April 2017, with the aim of encouraging younger people to save for their first home in the UK, to a value of up to £450,000, and/or for their retirement. 25% Bonus paid monthly. With a cap of £4000pa. 25% penatly if not to buy first home, retirment or terminally ill.
What ages are eligible for a lifetime ISA?
18-40
Savings made in a lifetime before a certain attracts a bonus paid by the government, what is the age and rate?
Savings made before the age of 50 attract a bonus of 25% (paid by the government).
How often is the lifetime ISA bonus paid?
In 2017/18, the bonus was paid annually but since 6 April 2018 it is paid monthly, which enables interest to be earned on the bonus.
