Top ten things to think about at Tax Year End
Tax year end is a busy time for the financial planner, so our M&G Wealth Technical team have recorded a series of videos covering better outcomes for clients. Look out for an email each day with a link to the next video in the series.
To claim your CPD certificate, test your knowledge with the questions below.
Write down your answers to each of the following questions and check your answers when you click through to claim your CPD certificate on the link below.
Test your knowledge
1. In 2006, Sarah purchased 10,000 shares at £2.50 each in an OEIC fund. In 2012, she purchased a further 5,000 shares in the same fund at £4 each. She sells 6,000 shares from her 15,000 share portfolio. What is the acquisition cost per share in her capital gains tax calculation?
2. For the exemption to apply, it must be shown that a transfer of value meets certain conditions. How many conditions are there?
3. Mark has recently sold a rental property and after deduction of annual exempt amount, has ended up with a taxable gain of £40,000. Mark is employed, but also has received some rental income this year, bringing his total income to £50,270. His adviser suggests making a net contribution to a personal pension of £32,000 to mitigate some of the capital gains tax payable. If Mark lives in England and subject to the UK income tax rates, how much tax relief will he benefit from if he makes this contribution?
4. Leon is 74 years old and his adviser has suggested he uses tax free cash from his pension to find his ISA this tax year. Why might that be?
a. An ISA is more tax efficient than a pension
b. If Leon dies after age 75, the tax free cash will become taxable for those who inherit the pension
c. Leon can’t take tax free cash once he’s turned 75 so he should take it while he can
d. The adviser need to do something to justify his ongoing adviser charge
5. For someone with no relevant earnings, how much an they pay into a pension in the current tax year?
d. £40,000 and any available carry forward
6. For a client whose not been a member of a pension scheme before, how much carry forward can they use?
a. £120,000 (assuming that they had relevant earnings of £40,000 for each of the last three years)
b. Any unused tax relief that they had available for the last three tax years
7. If a client meets all 6 of the tests for recycling, they will definitely fall foul of the recycling rules?
8. Rohit gifted £3,000 to his daughter on 5 April 2021 and £3,000 to his son on 6 April 2021. In July 2021 he also gifted a further £1,500 to his son and daughter, £500 to each of his siblings and £250 to each of his six nephews and four nieces. What’s the total of exempt gifts made this tax year?
9. Mia is employed and her salary of £18,000 is her only source of income. She triggers an onshore bond gain of £11,000. Hans is self-employed with earnings of £8,000 this tax year end and he triggers an offshore bond gain of £4,000. Which of the following statements is true?
a. Mia won’t need to self-assess because no further tax is payable on the bond gain
b. Hans won’t need to self-assess because no further tax is payable on the bond gain
c. Hans needs to self-assess but Mia doesn’t because she’ll have no further tax to pay
d. Mia and Hans will need to self-assess
10. Which of the following methods of profits extraction reduces corporation tax?
a. Salary and dividends
b. Salary, dividends and pension contributions
c. Salary and pensions
d. Pensions only
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