CISI IoI Taxation of Investments

Question 1

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

Accepted Answer

GBP 3,000

Answer

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.

Question 2

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

Accepted Answer

At 8.75%

Answer

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.

Question 3

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

Accepted Answer

GBP 20,000

Answer

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.

Question 4

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

Accepted Answer

Gains are completely free from Capital Gains Tax and Income Tax

Answer

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.

Question 5

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

Accepted Answer

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

Answer

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.

CISI Introduction to Investment Practice Test

CISI Introduction to Investment Practice Test

CISI IoI Taxation of Investments