ISAs

Question 1

What is an ISA

Answer 1

1. A wrapper that hold investments free of UK income Tax

Question 2

Types of ISA

Answer 2

1. Cash ISA
2. Stocks and Shares ISA
3. LISA
4. Innovative Finance ISA

Question 3

Who is eligible for an ISA

Answer 3

1. UK resident
2. A crown employee or their souse living overseas
3. 18+ for all
4. Below 40 for LISA

Question 4

Subscription Limits

Answer 4

1. £20,000 in any ISA per annum
2. Max. £4k per annum in LISA
3. Flexible ISAs allow withdrawals to be put back in, in same year

Question 5

Tax advantages of ISAs

Answer 5

1. Withdraw anytime without loss of Relief
2. Interest, Dividends and property income distributions exempt from income tax
3. CGT exempt

Question 6

Explain Invalid ISA

Answer 6

1. ISA that has been over subscribed in the year
2. Savings Scheme Office (SSO) identify and notify ISA manager and investor
3. Any tax relief given in error repaid

Question 7

Conditions for Stakeholder Deposit Account (Cash ISA)

Answer 7

1. No charges
2. Minimum deposit max. £10
3. Deposits taken via, Cash, cheque, direct debit, standing order, direct credit
4. Unlimited withdrawals within 7 days
5. Interest rate no less than 1% below BOE base rate (within 1 month of BOE changing)

Question 8

Conditions for Stakeholder Medium-term Investment Products (MTIP) (S+S ISA)

Answer 8

1. annual charge max 1.5% of fund for first 10 years and 1% after
2. minimum investment max £20.
3. No more than 60% invested in riskier assets (equities + property)
4. Investments made via cash, cheque, direct debit, standing order, direct credit.
5. Prices Units/Shares bought and sold = same price

Question 9

Main Types of ISA

Answer 9

1. Unit Trust + OEIC IAs
2. Investment Trust ISAs - additional charges
3. Managed ISAs - stockbrokers
4. Self-select ISAs
5. Corporate ISAs - invest in specific co.
6. Derivative-based ISAs - ‘guaranteed ISAs’
7. Cash ISAs
8. Help to buy ISA - for every £200 saved, £50 boost by govt - max £3k pa
9. Innovative Finance ISA - peer-to-peer lending
10. Lifetime ISA - max £4,000 pa + 25% boost from govt.

Question 10

What are the charges on an ISA for ISA managers

Answer 10

1. Initial charge
2. Annual Charge - Fund and wrapper
3. Other charges:
   
   • Early encashment charge - first 3-5 years
   • Commission
   • Dividend Collection Fee
   • Report Charges

Question 11

Explain Transfers between ISA managers

Answer 11

1. Balances can be transferred between managers in part or in full
2. If lifetime ISA transferred to different ISA before age 60 - 25% withdrawal charge
3. Take no longer than 15 working days (cash) and 30 working days (S+S)

Question 12

Explain what happens to ISAs on death

Answer 12

1. Becomes continuing ISA until earlier of:
   
   • estate administered
   • ISA is closed
   • 3 years and 1 day after death
2. Spouse can claim APS, higher of:
   
   • Value on date of death
   • Value on date assets pass on

Question 13

Explain Junior ISA

Answer 13

1. Under 18s w/ no Child Trust Fund
2. Cash or Stocks and Shares
3. All returns tax free
4. Max subscription £9,000 pa
5. Parent can open before 16 or child at 16
6. Matures at 18 into adult ISA

Question 14

Explain Child Trust Fund

Answer 14

1. Conts can be made to existing - £9,000 pa max
2. Prior to 16 managed by parent
3. Withdrawals not allowed till 18
4. Matures at 18 but can keep its tax advantaged status
5. Can roll over into ISA