Direct Investments

Question 1

How is tax worked out for savings interest.

Answer 1

£12,570 personal allowance
0% for someone with taxable earned income below £5000 (savings only)
£1000 free basic (savings only)
£500 free higher (savings only)

Question 2

Banks Building societies and collective most fixed interest investments pay interest….

Answer 2

Gross

Question 3

Forms of savings such as from life annuities pay interest….

Answer 3

Net of 20% savings rate

Question 4

Non taxpayers and those liable to only the starting rate can….

While higher and additional rate will…

Answer 4

Reclaim excess tax paid using HMRC form R40.

Have further tax to pay.

Question 5

To ensure the correct tax is paid, what should be done?

Answer 5

Anyone re ieving interest should declare it on their tax return.

Question 6

Describe NS&I ISA

Answer 6

Tax free Cash ISA with minimum £1 subscription.
Only available online and on the phone.

Question 7

Describe NS&I junior isa.

Answer 7

Tax-free
Up to £9000
Min contribution £1

Question 8

Describe NS&I certificate

Answer 8

Not on sale but avialbel for maturing certificates.
Tax free
Penalty 90 days interest early withdrawal.
Fixed interest
Index linked - linked to RPI or CPI for those after 1/5/19

Question 9

Discribe NS&I growth bonds

Answer 9

Not on sale and no access till maturity for those after 01/05/19
Pay guaranteed fixed return
Paid gross (tax return)
Minimum £500 per person
Maximum £10000 per person
Over 16s single or joint

Question 10

Discribe green bonds

Answer 10

3 year fixed savings - no withdrawals for 3 years
Anyone over 16
Investment online
Paid gross (tax return)

Question 11

Describe NS&I bank accounts

Answer 11

Investment accounts-
£20
Max £1m sole £2m joint
Easy access
Postal only
Paid gross

Direct saver
Internet phone only
Min £1
£2m sole £4m joint max
Paid gross

Question 12

What NS&I products are tax free?

Answer 12

Premium bonds
ISA
Certificates
Kids ISA

Question 13

How are tax fixed interest securities taxed?

Answer 13

No CGT, but also no losses.
Taxable as savings income.
Paid gross. (Tax return)

Same for PIBS/PSIBS.

Question 14

What is the dividend allowance?

Answer 14

£1000

Question 15

What are the rates for dividend tax above the dividend allowance?

Answer 15

8.75%
33.75%
39.35%

Question 16

What is the tax rate for CGT on shares

Answer 16

10%
20%

Can be both if straddling

Question 17

What may also be payable on shares?

Answer 17

Stamp duty or stamp duty reserved tax

Question 18

How are buy to let’s taxed?

Answer 18

Charged on profits calculated using standard accounting.
Tax year till 31st March
Tax paid under self assement
Losses carried forward or, in some cases, used for losses in the same year.

Question 19

How is income for property income calculated?

Answer 19

All UK property is pooled together regardless of type of lease or whether it is furnished or not.

The same rules apply for overseas property, but it is kept in a separate pool.

Question 20

What type of income is property income.

Answer 20

Investment not earned

Question 21

What are the deductions on property income?

Answer 21

Repairs and maintenance. (Not improvments)
20% effective rate deduction for interest payable on loan or overdraft for property.
Premiums for insuring
Profesional charges
Gas and electricity paid by the landlord
Various other costs
Replacement allowance (furniture, etc.)

Question 22

Why can it be beneficial to a landlord to provide substantial services?

Answer 22

Their property becomes a trade giving advantages such as.
Greater ability to offset losses
Making tax relieved pension contributions.
Claiming capital gains tax rollover or holdover relief
Inheritance tax relief

Question 23

What would constitute substantial services?

Answer 23

Having laundry, cleaning, and one meal a day.

Question 24

What is added to stamp duty land tax for buy to let?

Answer 24

3% sur charge for second properties even on those that would escape. SDLT.

Question 25

What is a primium when talking about property?

Answer 25

When a NEW tenant pays a lump sum on a lease upfront and an agreement to pay rent monthly or quarterly during the term of the lease.

Question 26

What are the rules for premiums on the lease of property?

Answer 26

Less than 2 years treated as rent. More than 50 years, treated as a payment for a disposal of property. (CGT for the landlord) 2 to 50 years split as rent and capital sum.

Question 27

How is the spilt handeld for lease between 2 and 50 years?

Answer 27

The income portion reduced by one 50th for each year besides the first. The remainder become CGT.

Question 28

Due to sur charge on property, what can be done from a planning perspective?

Answer 28

Offset the residential property gain first.

Question 29

What are the advantages of furnished holiday letting?

Answer 29

Income is treated as relevant income for pension purposes. Still has 8% sur charge, but rollover, holdover, and business asset disposal relief may be available.

Question 30

What does rollover relief allow?

Answer 30

The gain to be rolled over against the cost of a new business asset bought 1 year before or 3 years after the disposal.

Question 31

What is holdover relief?

Answer 31

Relief that can be applied for in respect of furnished holiday lets or trade properties that are gifted. CGT can be held over until the donor disposes of the property.

Question 32

Diacribe business asset disposal?

Answer 32

Allows 10% tax rate instead of 20% for higher or additional rate tax payers disposing of or part disposing of thier business. Upto 1m lifetime gains

Question 33

What are the rules to qualify as a furnished holiday let?

Answer 33

Situated in the UK or EEA Must be furnished Must be let on a commercial basis (no need to be holiday) Must be available for the public 210 days and let 105. Max let time 155 days per let.

Question 34

If you rent part of your main residence, what can you claim?

Answer 34

Rent room relief

Question 35

What does rent room relief provide?

Answer 35

Income tax relief on the property as long as the receipts don't go over £7500.

Question 36

If receipts go over £7500 what can a landlord do in regards to room relief?

Answer 36

Either be taxed in the normal way (income less expenses) but without the relief. Take the relief but can not claim back expenses

Question 37

How is room relief handled with joint ownership?

Answer 37

It is split in half between the owners.

Question 38

What happens if someone lets out part of their property in a self-contained part?

Answer 38

They may pay CGT on this part. On the lowest part of either £40000 The amount of the capital gains that is expemt