Taxation of Investments Flashcards

What is the current annual exemption for Capital Gains Tax (CGT) for individual UK taxpayers in the 2025/26 tax year?

Answer: GBP 3,000

The annual CGT exemption for individuals was reduced to GBP 3,000 for the 2024/25 tax year onwards (down from GBP 6,000 in 2023/24 and GBP 12,300 in 2022/23). Gains up to this amount are tax-free; gains above are taxed at the applicable CGT rate.

How are dividends from UK shares taxed for a basic rate taxpayer (above the dividend allowance)?

Answer: At 8.75%

For the 2025/26 tax year, dividends above the dividend allowance (GBP 500) are taxed at 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. These rates are lower than the equivalent income tax rates to reflect corporation tax already paid by the company.

What is the maximum amount that can be invested in an Individual Savings Account (ISA) in the 2025/26 tax year?

Answer: GBP 20,000

The annual ISA allowance has been GBP 20,000 since the 2017/18 tax year and remains at this level for 2025/26. This can be split between different types of ISA (Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, Lifetime ISA) but the total across all ISAs cannot exceed GBP 20,000.

What is the tax treatment of gains made within an Individual Savings Account (ISA)?

Answer: Gains are completely free from Capital Gains Tax and Income Tax

One of the key benefits of ISAs is that all investment returns — including capital gains, dividends, and interest — are completely free from Income Tax and Capital Gains Tax. There is no requirement to report ISA income or gains on a tax return.

How is interest income from a UK corporate bond typically taxed?

Answer: It is taxed as savings income at the individual's marginal rate of Income Tax

Interest income from corporate bonds is classified as savings income and taxed at the individual's marginal rate of Income Tax (20%, 40%, or 45%). However, the Personal Savings Allowance (GBP 1,000 for basic rate, GBP 500 for higher rate, nil for additional rate) may apply, making some interest tax-free.

What is the Capital Gains Tax rate for a higher rate taxpayer disposing of listed shares in the 2025/26 tax year?

Answer: 24%

From October 2024, CGT rates on share disposals increased. For higher and additional rate taxpayers, the rate on gains from listed shares is 24% (up from 20%). Basic rate taxpayers pay 18% (up from 10%). These rates apply after deducting the annual exempt amount.