CISI IAD Tax-Efficient Investing

Question 1

What is the annual ISA allowance for 2025/26 and what types of ISA are available?

Accepted Answer

£20,000 per year across the ISA family, including Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, and Lifetime ISA (with a £4,000 sub-limit for Lifetime ISA)

Answer

£10,000 per year; Cash ISA and Stocks & Shares ISA only

Answer

£25,000 per year; there is only one type of ISA for all purposes

Answer

£15,000 per year; available only to those under 50

Question 2

What are the key tax advantages of saving into a pension in the UK?

Accepted Answer

Pension contributions receive income tax relief at the contributor's marginal rate, funds grow free of UK income tax and capital gains tax within the pension, and at retirement 25% of the fund can be taken tax-free with the remainder subject to income tax

Answer

Pension contributions receive income tax relief, investments grow free of UK tax, and withdrawals are entirely tax-free

Answer

Pension contributions are tax-free up to £10,000; withdrawals are always tax-free

Answer

Pensions are exempt from inheritance tax and provide unlimited tax relief on contributions

Question 3

What is the 'annual allowance' for pension contributions in 2025/26?

Accepted Answer

£60,000 (or 100% of earnings if lower)

Answer

£20,000

Answer

£1,073,100

Answer

£40,000

Question 4

What is the 'carry forward' rule for pension contributions?

Accepted Answer

The ability to use unused annual allowance from the previous three tax years to make pension contributions above the current year's annual allowance

Answer

The ability to carry forward unused pension funds to a new provider without tax consequences

Answer

The rule allowing pension providers to carry forward administration charges

Answer

The ability to carry forward pension losses to offset against other income

Question 5

What is 'bed and ISA' as a tax planning strategy?

Accepted Answer

Selling investments held outside an ISA and immediately repurchasing the same investments within an ISA wrapper, thereby sheltering future gains from CGT, though the sale crystallises any existing gain

Answer

A strategy of holding cash in an ISA overnight and converting it to equities the next day

Answer

Transferring a Stocks & Shares ISA into a Cash ISA annually to lock in gains

Answer

A strategy of borrowing against ISA holdings to fund a property purchase

Question 6

What is 'Enterprise Investment Scheme' (EIS) relief and what tax benefits does it offer?

Accepted Answer

An HMRC-approved scheme offering 30% income tax relief on investments in qualifying small unquoted trading companies, plus CGT exemption on gains after 3 years and loss relief against income or capital gains

Answer

A government scheme offering 10% income tax relief on investments in small quoted companies

Answer

A scheme offering 20% relief on venture capital fund investments

Answer

A pension contribution scheme for directors of Enterprise companies