To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions.
Which of the following values is used in the calculation of a chargeable event gain on a single-premium life assurance policy that arises on the death of the life assured?
A) The amount paid out on death
B) The surrender value immediately before death
C) The amount paid into the policy
D) The difference between the sum assured and premiums paid
A UK-resident policyholder effected an offshore bond 10 years ago which he now encashs. For five of those years, the policy-holder was neither resident nor ordinarily resident in the UK. For tax purposes, the chargeable-event gain will be?
A) Taxable only at the higher and/or additional rate
B) Entirely tax free
C) Taxable in its entirety
D) Reduced to reflect the time the policyholder was abroad
Charlie is a higher-rate taxpayer. He has held an investment bond for five years and has taken no withdrawals. He assigns the bond to his daughter, Emily, on her 21st birthday. What is Charlie’s liability to income tax when undertaking the assignment?
A) No income tax liability arises
B) A chargeable event is triggered and Charlie must pay any tax liability
C) A chargeable event is triggered, but Charlie and Emily can elect for Emily to be assessed for tax
D) A chargeable event is triggered and Emily must pay the tax as the donee
An investment bond allows the investor to withdraw each year for 20 years?
A) 5% of the fund value – tax-free
B) 5% of the fund value – tax-deferred
C) 5% of the amount invested – tax-free
D) 5% of the amount invested – tax-deferred
Albert has taxable income of £3,000. He decides to surrender his UK investment bond and triggers a chargeable event gain of £80,000. He has held the bond for 10 years. What income tax liability arises as a result of the surrender?
B) 10% on the whole gain
C) 20% on the top-slice that sits in the higher-rate tax band
D) 20% of the amount of the gain that exceeds the higher-rate tax threshold
Questions are set by Technical Connection
Answers: B, D, A, D, A