Unit 9: Taxation, Investment Wrappers and Trusts

Student Workbook
Unit 9 Learning
Learning Outcomes
Chapter
Objective Section
Unit Aim: Understand the different taxes, Know the definition of and tax incentives provided by
9.2.1 ISAs 3
investment wrappers and features of trusts.
Know the main types of ISA available:
Relevance of this unit to the course: • Cash ISA
Having explored ethical practice within the • Stocks and shares ISA
9.2.2 • Innovative ISA 3
sector, this unit will identify some key features
• Lifetime ISA
that will be reviewed in unit 11. • Junior ISA
9.3.1 Know the benefits provided by pensions 4
Know the basic characteristics of the following:
Learning Chapter • State Pension Scheme
Learning Outcomes 9.3.2 4
Objective Section • Occupational Pension Scheme
Know the direct and indirect taxes affecting individuals • Personal Pensions including SIPPs
• Income tax Know the features of the main trusts:
• Capital gains tax • Discretionary
• Inheritance tax 9.4.1 • Interest in possession 5
9.1.1 • Stamp duty 2 • Bare
• Corporation tax
• State benefits / HMRC tax credits Know the definition of the following terms:
• National insurance • Trustee
9.4.2 • Settlor 5
• Residency / domicile
• Beneficiary
Know the main exemptions in respect of the main
9.1.2 2
personal taxes 9.4.3 Know the main reasons for creating trusts 5
2
How to use this student workbook
Throughout this student workbook, look out for the different icons to support your learning:

Understand and learn – these sections will help you to develop your knowledge and
understanding of the assessed learning objectives.

Apply and practise – Practise and test your newly acquired learning by undertaking a range
of activities to help you prepare for the multiple choice assessment at the end of the course.

Further your knowledge – Consolidate your understanding of key concepts by reading and
interacting with current, credible resources to help further enhance your learning.

3
Introduction
“Nothing is certain but death and taxes”
Benjamin Franklin, 1789.

Write down your thoughts on the following:

Why do we pay taxes?

What different types of taxes can you think of?

4
Learning Outcome 9.1 – Tax
9.1.1: Understand the direct and indirect taxes affecting individuals
• Income tax • Stamp duty • National insurance
• Capital gains tax • Corporation tax • Residency / domicile
• Inheritance tax • State benefits/HMRC tax credits
9.1.2: Know the main exemptions in respect of the main personal taxes 5
Taxation
Read section 2 about the different types of taxation in chapter 9 of the course workbook.
In your own words summarise the 3 types of income tax in the table below.

Non-savings income Savings income Dividend income

6
Income tax
The amount of non-savings income tax that 3. What is a tax code and how are these used?
individuals pay is based on earnings from
employment and/or pension income. Using the
Gov.UK website, answer the following questions:

1. W
 hat is the standard personal allowance currently in the UK and
what does this mean?
4. Who administers income tax in the UK?

2. What are the current income tax bands?

7
Income tax
Interest on savings is taxed after earned income. In
Band Tax free savings allowance
2016, a personal savings allowance was introduced
and is based on the individual’s tax band. Using Saving rate
Gov.UK, read the information about tax on savings
Basic rate
interest and complete the table on the right:
Higher rate

Additional rate

8
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
How it works – the savings rate
If an individual earns less than £17,570 per year, they
You earn £16,000 of wages and get £200 interest on
are eligible for the “savings rate”. This means that if your savings.
a persons earns below the personal allowance, they
can earn £5,000 in savings interest before they pay Your Personal Allowance is £12,570. It’s used up by the
tax on it. For every £1 of other income above the first £12,570 of your wages.
Personal Allowance, it reduces the starting rate for The remaining £3,430 of your wages (£16,000 minus
savings by £1. Take a look at the example taken from £12,570) reduces your starting rate for savings by
Gov.UK showing how it works. £3,430.

Your remaining starting rate for savings is £1,570

How much income tax will you pay on your earned (£5,000 minus £3,430). This means you will not have to
pay tax on your £200 savings interest.
income during that tax year?

9
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Calculating income tax
Carlos receives earned income of £24,000 and received savings interest of £300 during the year.
In total, how much income tax does he owe?

Earned income - £

Personal Allowance - £

Tax payable - £

Savings interest - £

Personal saving allowance - £

Tax payable - £

TOTAL INCOME TAX PAYABLE = £

10
Calculating income tax
Ash is a higher rate tax payer with earned income of £62,000 and received £1,200 in savings interest. How
much tax do they owe?

Earned income - £

Personal Allowance - £

Tax payable - £

Savings interest - £

Personal saving allowance - £

Tax payable - £

TOTAL INCOME TAX PAYABLE = £

11
Tax on dividend income
You may get taxed in you earn shares in a company and receive dividend income each year. Read Gov.UK
rules around the dividend allowance and the tax bands that apply and answer the following questions:
1. How are dividends taxed? 4. W
 rite a case study about a client who has shares and pays tax on
their dividends. Show all of your calculations

2. What is the current dividend allowance?

3. What are the current tax rates on dividends (over the allowance)

12
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Income tax exemptions
List 5 tax free income streams below:

1.

2.

3.

4.

5.

13
National Insurance
Read the section about National Insurance in the 3. What are the different National Insurance classes?
course workbook and on Gov.UK. Complete the
following questions:

1. What do National Insurance Contributions fund in the UK?

4. H
 ow can people check their National Insurance record and why
should we all do this?

2. Who pays National Insurance?

14
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Capital Gains Tax
Using the course workbook and Gov.UK website, 3. What assets are exempt from Capital Gains Tax?
answer the questions below:

1. In your own words, explain Capital Gains Tax.

4. What are the current allowances and rates of Capital Gains Tax?

2. What assets are liable to Capital Gains Tax?

15
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Further your knowledge – Capital Gains Tax
Log in to the professional refresher section of the CISI
learning platform and complete the Capital Gains Tax
essentials module (45 mins). This module examines
the different types of assets that are affected, the
various rates and some of the special arrangements
relating to residencies, possessions and investments.

16
Inheritance Tax
Using the course workbook and Gov.UK website, 3. What is the current rate of standard Inheritance Tax?
answer the questions below:

1. In your own words, explain Inheritance Tax.

4. What assets are exempt from Inheritance Tax?

2. What is the current Inheritance Tax threshold?

17
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Further your knowledge – Inheritance Tax
Log in to the professional refresher section of the
CISI learning platform and complete the Inheritance
Tax essentials module (1hr 15 mins). This module
examines the rates, excepted estates, how certain
gifts fall into an estate and the effects of intestacy.

18
Watch the video on CISI TV about what tools
financial planners can use to achieve client
objectives when it comes to Inheritance Tax.

19
Stamp Duty and Stamp Duty Land Tax
Using chapter 9 of the course workbook and the 3. What is the current rate of stamp duty?
Gov.UK website, answer the following questions:

1. W
 hat is the difference between Stamp Duty and Stamp Duty
Land Tax (SDLT)?
4. W
 hat is the current threshold/rate of stamp duty land tax for
residential properties?

5. What is exempt from stamp duty?

2. What is Stamp Duty Reserve Tax (SDRT)?

20
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Value Added Tax (VAT)
Using chapter 9 of the course workbook and Gov.UK, 3. What is VAT charged on?
answer the following questions:

1. What is VAT?

4. What products and services are except from VAT?

2. What is the current standard rate of VAT?

21
Corporation Tax
Using chapter 9 of the course workbook and the 3. Explain the current different rates of Corporation Tax.
Gov.UK website, answer the following questions:

1. What is Corporation Tax?

4. What organisations are except from Corporation Tax?

2. Is Corporation Tax paid on gross or net profit?

22
Residency / domicile
Using chapter 9 of the course workbook, answer the 3. W
 hat is the difference between a UK resident and a
non-resident?
following questions:

1. What does domicile mean?

2. Explain the 3 types of domicile.

23
Which tax is it?
Using your knowledge about the different types of 4. Charged at a standard rate of 20% on goods and service
UK taxation, decide which tax applies in the following
scenarios

1. I t is charged in a unit trust are sold for more that the original 5. Has a basic rate of 20% on earnings between £12,571 - £50,270
price paid

6. The sale of a buy to let property that is not your home

2. It is charged at 0.5% of the purchase price of shares

7. Company profits of £70,000

3. H
 as a nil-rate of tax for assets received by an individual of
£325,000 or less

24
Further your knowledge – Tax
Complete the professional refresher module
on taxation (2hrs 15 mins) on the CISI learning
platform. This module explores all of the different
taxes in the UK.

25
Learning Outcome 9.2 – Investment wrappers
9.2.1: Know the definition of and tax incentives provided by ISAs
9.2.2: Know the main types of ISA available:
• Cash ISA • Lifetime ISA
• Stocks and shares ISA • Junior ISA
• Innovative ISA 26
Individual Savings Accounts (ISAs)
Read the section about ISAs in chapter 9 of the 4. What are the ISA subscription limits?
course workbook and the ISA section on the Gov.UK
website. Answer the following questions:

1. What is an ISA?

5. Is it possible to transfer ISAs? If so, how?

2. What does the term investment wrapper mean?

3. What is the key benefit of having an ISA?

27
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Different types of ISAs
Using online sources, research and complete the table below about the different types of ISAs

Type of ISA Annual Allowance (£) Description and main terms

Cash ISA

Stocks and Shares ISA

Innovative Finance ISA

Lifetime ISA (LISA)

Junior ISA (JISA)

Help to Buy ISA

28
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
 ISA Essentials
Log in to the Professional Refresher section of the
CISI learning platform using your username and
password and complete the ISA Essentials module
(30 mins). This module explores the different types of
ISA and outlines their broader role and purpose.

29
True or False – ISAs

True False

1. T he primary purpose of an ISA is to provide a guaranteed income for

pensioners
2. Only interest earned on cash ISAs is tax free
3. An investment wrapper refers to the protective regulations
surrounding ISA investments
4. HMRC is responsible for approving firms that offer ISA investment
products
5. ISAs can be gifted or transferred to another individual

6. The annual subscription limit is determined by an individuals income

30
Learning Outcome 9.3 – Pensions
9.3.1: Know the benefits provided by pensions
9.3.2: Understand the basic characteristics of the following:
• State Pension Scheme • Occupational Pension scheme • Personal Pensions including SIPPs 31
Pensions
Read the section about pensions in chapter 9 of
the course workbook and answer the following
questions:
Complete the Pensions and Provisions module
1. What is a pension? (1hr 45 mins) on the Professional Refresher section
of the CISI learning platform. This module examines
the definition, legislation and regulation around the
different types on pensions. It also explores saving
for retirement and retirement planning.

2. What are the benefits provided by pensions?

32
 The problems with British pensions
Listen to the CISI podcast episode about the
problems with British pensions. Summarise the key
issues discussed.

33
State pension scheme
Read the section on the Gov.UK website about state pensions, how to check
your state pension age and how to check your state pension forecast. Using
the Gov.UK website and the section on pensions in chapter 9 of the course
workbook, create a handout for your clients explaining the principles of the
new state pension, who is eligible, how to check your state pension age and
forecast plus any other details that your clients might consider important.

Other resources to help create your state pension handout include:

MoneyHelper
Money Saving Expert

34
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
Occupational pension scheme
Using the section about occupational pension 2. E xplain the differences between defined benefit and defined
contribution pension schemes. Consider the benefits and
schemes in chapter 9 of the course workbook and
implications of each.
information about workplace pensions on the Gov.
UK website, answer the following questions:

1. W
 hat are the benefits of being a member of a workplace pension
scheme?

3. What is “auto-enrolment”?

35
*CISI is not responsible for the accuracy, legality or content of any external sources referenced in this workbook
 Defined Benefits
Complete the Defined Benefits Pension Schemes
module (2hrs 15 mins) on the Professional Refresher
section of the CISI learning platform. This module
explores the differences between defined benefits
and contributions schemes, with particular attention
paid to the options for scheme holders and
employers.

36
Personal Pensions / Private Pensions (including SIPPs)
Read the section on personal/private pensions in the chapter 9 course workbook and answer the following
multiple choice questions.

1. What type of pension plans are private pensions or personal 2. What type of personal pension allows individuals to decide
pensions? which investments are included?

A. Defined benefit schemes A. Defined benefit scheme

B. Defined contribution schemes B

 . Workplace pensions

C. State pension schemes C. Group personal pension scheme

D. Joint pension arrangements D. Self-invested personal pensions

37
Personal Pensions / Private Pensions (including SIPPs)
Read the section on personal/private pensions in the chapter 9 course workbook and answer the following
multiple choice questions.

3. Which of the following is NOT a benefit of private pension 4. How are private pensions different from occupational
schemes? schemes?

A. Tax-deductible contributions A. Private pensions offer higher contribution limits

B. Tax-exempt investment income B

 . Private pensions are managed by employers

C. Tax-exempt capital gains C. P

 rivate pensions require self-organisation and investment
choices
D. Guaranteed retirement income
D. Private pensions are tax-exempt

38
 Pensions Advice and pension freedoms
Complete the Pensions Advice module (1 hr) on the
Professional Refresher section of the CISI learning
platform. This module investigates the issues relating
to giving advice and guidance following government
changes around pension freedoms.

39
Case study
Alex is 26, works full time and has paid into a
workplace, defined contribution pension since he
started working for his employer 4 years ago. Along
with his employer, Alex has only ever paid the
minimum contributions but is now thinking about
other ways to boost his retirement pot whilst he can.
As Alex’s financial adviser, what other information
might you need and what pension recommendations
might you suggest?

40
There is huge variety of videos on the CISI TV channel
around pensions from changes to the lifetime
allowance to the role of the regulator. To extend your
knowledge of pensions, search the extensive video
library using the filter below and choose a couple of
themes to watch that might interest you.

41
Learning Outcome 9.4 – Trusts
9.4.1: Understand the features of the main trusts:
• Discretionary • Interest in possession • Bare
9.4.2: Know the definition of the following terms:
• Trustee • Settlor • Beneficiary
9.4.3: Understand the main reasons for creating trusts 42
 Trusts
Complete the module on Trusts (1hr 15 mins) on the
Professional Refresher section of the CISI learning
platform. This module provides an understanding of
the definition of trusts, the different types available
and their features and benefits.

43
Trust terms
Choose the correct definition that matches main roles of the individuals
involved the process of establishing trusts.

1. Trustee
A – The person
B
C individuals
to
whowho
for
creates
whom
will look
the
theafter
trust
property
the property
is intended
on behalf of others
2. Settlor
A – The person
B
C individuals
to
whowho
for
creates
whom
will look
the
theafter
trust
property
the property
is intended
on behalf of others
3. Beneficiary
A – The person
B
C individuals
to
whowho
for
creates
whom
will look
the
theafter
trust
property
the property
is intended
on behalf of others

44
Main features of a trust
Choose the correct definition to go with the different types of trusts.

KEY
1. Discretionary A. The beneficiary has the right to the income of the trust during
C.
B.
A.
their life and the capital passes to others on their death.
2. Interest in possession
C.
B.
A. B. A
 trustee holds assets for one or more person absolutely
3. Bare C. The trustees have discretion over to whom the capital and
C.
B.
A. income is paid

45
To further your knowledge about trusts, watch the
Royal London Series: It’s all about the trust(s) video
on CISI TV. This looks at the business opportunities of
making trusts a key part of protection propositions.

46
End of Unit 9
Multiple Choice Assessment 47
Test your knowledge
1. The annual allowance for a stocks an 2. Firms offering ISAs must be
shares ISA is: approved by:

A. £4,000 A. FCA
B. £16,000 B. HMRC
C. £20,000 C. FOS
D. £9,000 D. Bank of England

48
Test your knowledge
3. ISAs are NOT: 4. Which of the following are except from
income tax? (tick all that apply)
A. Tax free
A. Premium bond prizes
B. Investment wrappers
B. ISAs
C. A
 rranged on a joint basis and put
into a trust C. Dividends on ordinary shares
D. A way to save and/or invest D. Statutory redundancy payments

49
Test your knowledge
5. A basic taxpayer has a savings tax 6. Capital Gains Tax is not liable on:
allowance of:
A. The sale of shares
A. £5,000
B. Your main home
B. £0
C. Sale of a second rental property
C. £
 500
D. Unit trusts
D. £1,000

50
Test your knowledge
7. If you buy shares electronically and no 8. The Inheritance Tax threshold for an
stock transfer form is used, you will pay: individual is:

A. Stamp Duty Reserve Tax A. £325,000

B. Stamp Duty B. £200,000
C. Stamp Duty Land Tax C. £650,000
D. Capital gains Tax D. £175,000

51
Test your knowledge
9. A defined contribution pension is not… 10. SIPP stands for

A. Also called a “final salary scheme” A. Self-invested personal pension

B. R
 elated to the number of years B. State-invested personal pension
service
C. Self-invested pension pot
C. A
 ble to passed to a spouse, civil
D. State-initiated pension pot
partner or dependent when you die
D. D
 etermined by the value of
investment funds at retirement

52
Test your knowledge
11. If a client chooses to take all of 12. A settlor is
their pension as a lump sum, what
proportion is tax free?
A. A person who benefits from a trust
B. A person who creates a trust
A. 75%
C. A person who looks after a trust for
B. 50%
someone else
C. 2
 5%
D. A person who manages lots of trusts
D. 10%

53
Test your knowledge
13. An interest in possession trust is:

A. When a trustee holds assets for one or more person absolutely

B. When a trustee has discretion over whom the capital and income is paid
C. When a trustee is able to pass a trust to someone of their choice
D. W
 hen a beneficiary has access to the income of the trust during their life
and the capital passes to others an their death

54
Test your knowledge
14. Domicile helps to determine: 15. What tax helps to build entitlement to
(tick all that apply) the UK state pension?

A. How much IHT is payable and where A. Income tax

B. Who inherits, if there is no will B. National Insurance Contributions
C. Where someone lives C. Capital gains Tax
D. W
 ho has the right to inherit assets D. VAT
on death

55
Monitoring my progress – Unit 9

My multiple choice assessment mark is / 15

I am happy with the progress that I made on the multiple choice assessment
Yes No

To improve my knowledge and understanding, I now need to….

1.
2.
3.

56
Need more help?
If you feel that your multiple choice score can
be improved further, complete the end of unit 9
multiple choice questions in the course workbook.

57
Answers
Page 7 Tax payable - 0
1. What is the standard personal allowance currently in the UK and what does this mean? TOTAL INCOME TAX PAYABLE = £2,286 + £0 = £2, 286
£12,570 (as of June 24) – amount you can earn before income tax is paid
2. What are the current income tax bands? – Page 11
Income Tax bands 2024/25 Answer based on 2024/25 rules
£0 to £12,570 - 0% Earned Income - £62,000
£12,571 to £50,270 - Basic rate: 20% Personal allowance - £12,570
£50,271 to £125,140 - Higher rate: 40% Income @20% (£12,571 - £50,270) = £37, 699 @20% = £7,540 (rounded up)
Over £125,140 - Additional rate: 45% Income at 40% (50,271 - £62,000) = £11,729 @40% = £4,692 (rounded up)
3. What is a tax code and how are these used? – used by your employer or pension Tax payable on earned income = £7,540 + £4,962 = £12,232
provider to work out how much income tax to take from your pay/pension Savings interest - £1,200
4. Who administers income tax in the UK? HMRC Personal saving allowance - £500 (higher taxpayer)
Tax payable - £1,200 - £500 = £700 @40% higher tax tax =
Page 8 Tax payable on savings = £280
Savings rate – up to £5,000 TOTAL INCOME TAX PAYABLE - £12,232 + £280 = £12,512
Basic rate - £1,000
Higher rate - £500 Page 12
Additional rate - £0 1. How are dividends taxed?
You do not pay tax on any dividend income that falls within your Personal
Page 9 Allowance (the amount of income you can earn each year without paying
Income - £16,000 (basic tax payer) tax).
Personal allowance - £12,570 You also get a dividend allowance each year. You only pay tax on any
Pay 20% on the remaining £3,430 = £686 dividend income above the dividend allowance.
You do not pay tax on dividends from shares in an ISA
Page 10
2. What is the current dividend allowance? £500
Answer based on 2024/25 rules
Earned Income - £24,000 3.  What are the current tax rates on dividends (over the allowance)?
Personal allowance - £12,570 How much tax you pay on dividends above the dividend allowance depends
Tax payable on £11,430 (£24,000-£12,570) @20% = £2,286 on your income tax band
Savings interest - £300
58
Personal saving allowance - £1,000 (basic taxpayer)
Answers
Tax band Tax rate on dividends over the allowance Page 20
Basic rate 8.75% 1. What is the difference between Stamp Duty and Stamp Duty Land Tax (SDLT)?
Higher rate 33.75% Stamp duty is a tax paid on UK shares by the purchaser
Additional rate 39.35% Stamp duty land tax (SDLT) is payable by the purchaser on purchases of land and
To work out your tax band, add your total dividend income to your other income. You may property in the UK.
pay tax at more than one rate. 2. What is Stamp Duty Reserve Tax (SDRT)? Stamp duty reserve tax (SDRT) is payable
when an individual buys shares electronically and no stock transfer form is used.
Page 13 3. What is the current rate of stamp duty? 0.5% - paid by the purchaser
1. Premium bond prizes 4. What is the current threshold/rate of stamp duty land tax for residential properties?
2. Interest on national saving certificates SDLT is paid on properties over £250,000 (paid price)
3. Income from ISAs (Individual Savings Accounts) You pay stamp duty at these rates if, after buying the property, it is the only residential
4. National lottery/gambling wins property you own.
5. Statutory redundancy payments and up to £30,000 loss of employment You usually pay 3% on top of these rates if you own another residential property.
6. Dividends on ordinary shares of a venture capital trust (VCT) Up to £250,000 – Zero
The next £675,000 (the portion from £250,001 to £925,000) - 5%
Page 14
The next £575,000 (the portion from £925,001 to £1.5 million) - 10%
Answers based on 24/25 rules
The remaining amount (the portion above £1.5 million) - 12%
1. What do National Insurance Contributions fund in the UK? State pension, maternity
5. What is exempt from stamp duty?
allowance, bereavement support payment, JSA, contribution based ESA
You do not have to pay tax if you:
2. Who pays National Insurance?
• are given shares for nothing
You pay mandatory National Insurance if you’re 16 or over and are either:
• subscribe to a new issue of shares in a company
• an employee earning more than £242 per week from one job
• buy shares in an ‘open ended investment company’ (OEIC) from the fund manager
• self-employed and making a profit of more than £12,570 a year
• buy units in a unit trust from the fund manager
3. What are the different National Insurance classes? https://www.gov.uk/national-
insurance/national-insurance-classes Page 21
4. How can people check their national Insurance record and why should we all do this? What is VAT? VAT (Value Added Tax) is a tax added to most products and services sold by
1. 
Log onto your Governments Gateway Account. You can see how many years you have paid VAT-registered businesses. Businesses have to register for VAT if their VAT taxable turnover
into the state pension and how to “top up” missed years. is more than £90,000.
2. What is the current standard rate of VAT? 20%
59
Answers
3.  What is VAT charged on? Page 23
VAT is charged on things like: 1. What does domicile mean? Domicile is the country that a person treats as their permanent
• goods and services (a service is anything other than supplying goods) home, or lives in and has a substantial connection with
• hiring or loaning goods to someone 2. Explain the 3 types of domicile.
• selling business assets 1. Domicile of origin – the domicile that every person acquires at birth.
• commission 2. Domicile of choice – this is acquired by a person residing in a country with the intention
• items sold to staff - for example canteen meals of continuing to do so permanently or indefinitely.
• business goods used for personal reasons 3. Domicile of dependency – this arises in respect of children, married women and
4. What products and services are except from VAT? https://www.gov.uk/guidance/rates-of- mentally disordered persons. Their domicile will generally be the same as, and will
vat-on-different-goods-and-services change (if at all) in
VAT exempt goods and services include: 3. What is the difference between a UK resident and a Non-resident?
• financial services, investments and insurance Whether a person is a UK resident usually depends on how many days they physically spend
• garages, parking spaces and houseboat moorings in the UK in the tax year (6 April to 5 April the following year). You are automatically resident
• property, land and buildings if either:
• education and training • you spent 183 or more days in the UK in the tax year, or
• healthcare and medical treatment • your only home was in the UK – you must have owned, rented or lived in it for at least 91
• funeral plans, burial or cremation services days in total – and you spent at least 30 days there in the tax year.
• charity events • You are automatically non-resident if either:
• antiques • you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK
• gambling or lottery tickets resident for the three previous tax years), or
• sports activities • you work abroad full time (averaging at least 35 hours a week) and spent fewer than 91 days
in the UK, of which no more than 30 were spent working.
Page 22
1. What is Corporation Tax? Tax on business profit – Ltd and PLC only Page 24
2. Is Corporation Tax paid on gross or net profit? Net profit 1. It is charged in a unit trust are sold for more that the original price paid – Capital Gains Tax
3. Explain the current different rates of Corporation Tax. 2. It is charged at 0.5% of the purchase price of shares – Stamp Duty or SDRT
• Small profit rate (up to £50,000 net profit) – 19% 3. Has a nil-rate of tax for assets received by an individual of £325,000 or less – Inheritance Tax
• Marginal relief (profit between £50,000-£250,000 4. Charged at a standard rate of 20% on goods and service - VAT
• Main rate – net profit above £250,000 - 25% 5. Has a basic rate of 20% on earnings between £12,571 - £50,270 – Income Tax
4. What organisations are except from Corporation Tax? – clubs and associations 6. The sale of a buy to let property that is not your home – Capital Gains Tax 60
7. Company profits of £70,000 – Corporation Tax
Answers
Page 27 • Transfer an existing ISA from one manager to another
1. What is an ISA? • Transfer savings between stocks and shares ISAs and cash ISAs
Individual savings accounts (ISAs) were set up by the government to encourage individual • There are restrictions on what you can transfer https://www.gov.uk/individual-savings-
investment. They were introduced in 1999 and have since been the main vehicle for saving accounts/transferring-your-isa
and investing tax efficiently. The particular incentive for investment is that the investments
held within an ISA are free of income tax and CGT. Page 30
2. What does the term investment wrapper mean? 1. The primary purpose of an ISA is to provide a guaranteed income for pensioners - False
An ISA itself is often referred to as an investment wrapper because it is essentially an account 2. One interest earned on cash ISAs is tax free - False
that holds other savings and investments, such as deposits, shares, OEICs and unit trusts, 3. An investment wrapper refers to the protective regulations surrounding ISA investments –
and allows them to be invested in a tax-efficient manner. The ISA acts as a wrapper, shielding False
the return on savings and investments held in it from tax. Firms offering investments in ISAs, 4. HMRC is responsible for approving firms that offer ISA investment products - True
such as banks, building societies and fund management companies, must be approved by 5. ISAs can be gifted or transferred to another individual - True
HM Revenue & Customs (HMRC). 6. The annual subscription limit is determined by an individuals income - False
3. What is the key benefit of having an ISA?
Page 32
Tax free. No income and capital gains tax payable
1. What is a pension? A pension is an investment fund where contributions are made, usually
4. What are the ISA subscription limits?
during the individual’s working life, to provide a lump sum on retirement plus an annual
Subscription limits are set annually and are usually increased by the rate of inflation unless
pension payable thereafter
the Chancellor announces a different rate at the budget. For the 2024–25 tax year, the ISA
2. What are the benefits provided by pensions?
subscription limit is £20,000. With reference to the table above, this means that:
 Pension contributions are tax-effective, as tax relief is given on contributions. Some of the
• The whole allowance can be invested in a cash ISA or a stocks and shares ISA, or an
main tax incentives of pensions include:
innovative finance ISA or any combination of these.
• Tax relief on contributions made by individuals and employers.
• Up to £4,000 of the annual subscription limit can be subscribed to a lifetime individual
• Pension funds are not subject to income tax and CGT and so the pension fund can grow tax-
savings account (LISA).
free.
• An investor can invest in any combination of ISAs providing that the total subscriptions are
• The ability to take a pension from age 55 (it is due to increase to 57 from 2028).
within the limits and the ‘one ISA of each type per tax year’ rule is met.
• An option to take a tax-free lump sum at retirement.
• For a JISA the subscription limit is £9,000
• The option to include death benefits as part of the scheme.
5. Is it possible to transfer ISAs? If so, how?
These tax advantages were put in place by the government to encourage people to provide
ISAs can be transferred. Individuals can:
for their own retirement. Pensions, however, are subject to income tax when they are
• Transfer shares into a stocks and shares ISA
received. 61
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Page 35 scheme up for yourself, you arrange the contributions yourself. The money in your pension is
1. What are the benefits of being a member of a workplace pension scheme? put into investments (such as shares) by the pension provider.
The advantages of these schemes are: The value of your pension pot can go up or down depending on how the investments
• Employers must contribute to the fund (some pension schemes do not involve any perform.
contributions from the employee – these are called non-contributory schemes). Some schemes move your money into lower-risk investments as you get close to retirement
• Tax relief age.
• Running costs are often lower than for personal schemes and the costs are often met by the You might be able to ask your pension provider for this if it doesn’t happen automatically
employer.
3. What is “auto-enrolment”? https://www.moneysavingexpert.com/savings/auto-enrolment/
• The employer must ensure the fund is well run, and for defined benefit schemes must make
up any shortfall in funding. Your employer has to enrol you into a workplace pension scheme, and to make contributions
to it, if you:
2. Explain the differences between defined benefit and defined contribution pension
• work in the UK
schemes. Consider the benefits and implications of each.
• are aged between 22 and State Pension age
Defined benefit - https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions- • earn more than £10,000 a year
basics/defined-benefit-or-final-salary-pensions-schemes-explained • aren’t already in a qualifying pension scheme.
A defined benefit (DB) pension scheme is one where the amount paid is based on how many Even if you’re not eligible for automatic enrolment, you still have the right to join a workplace
years an individual has been a member of the employer’s scheme and the salary earned pension scheme, if you ask. And, depending on your earnings, your employer might still have
when someone leaves or retires. to contribute to it.
They pay out a secure income for life which increases each year in line with inflation. https://www.moneyhelper.org.uk/en/work/employment/automatic-enrolment-what-to-
The employer contributes to the scheme and is responsible for ensuring there’s enough expect-from-your-employer
money at the time you retire to pay your pension income.
Page 37-38
Individuals can contribute to the scheme too, and, depending on the scheme, this may be a
1B
requirement.
2D
Usually continue to pay a pension to your spouse, civil partner or dependants when you die. 3D
Defined contribution - https://www.moneyhelper.org.uk/en/pensions-and-retirement/ 4C
pensions-basics/defined-contribution-pension-schemes Page 44
If you’re a member of a pension scheme through your workplace, then your employer usually 1B
deducts your pension contributions from your salary before it is taxed. If you’ve set the 2A
62
3C
Answers
Page 45
1C
2A
3B

Test your knowledge

1C
2B
3C
4 – ALL OF THEM
5D
6B
7A
8A
9D
10A
11C
12B
13D
14A, B, D
15B

63