Introduction

ISAs can provide a tax-efficient and relatively simple wrapper for saving – offering returns and withdrawals free from income and capital gains tax.

With the ISA annual subscription entitlement on a ‘use it or lose it’ basis, knowledge of all the options is vital to help clients use an appropriate ISA to meet their needs and effectively manage the taxation of their savings and investments.

This module should take around 60 minutes to complete. Once you have completed all the sections there is a short self-assessment quiz to check what you have learned and a CPD certificate for up to 60 minutes can be claimed.

Outcomes

On completion of this module you should be able to:

  1. Explain the types of ISAs available, subscription limits and different eligibility criteria
  2. Describe the restrictions and rules on withdrawing from Lifetime, Help To Buy and Flexible ISAs
  3. Detail how existing ISA holdings can be transferred
  4. Determine the implications of an individual’s ISA holding on death and its impact for any surviving spouse or civil partner

Post learning assessment

Question 1

Toby and Sarah have two children, Eilidh aged 19 and Magnus aged 16. They have recently inherited some money and are looking to set up ISAs to maximise the saving for the children. Which of these options is correct, but also offers the highest amount of saving?

  1. Stocks and Shares ISAs for both
  2. Stocks and Shares ISA for Eilidh and Cash ISA for Magnus
  3. Stocks and Shares ISAs for both plus a JISA for Magnus
  4. Stocks and Shares ISA for Eilidh, Cash ISA and JISA for Magnus

Question 2

Which of the following would NOT qualify for a penalty-free withdrawal from a Lifetime ISA:

  1. Tom, 26, to use as the deposit for his first home
  2. Denise, 61, to spend her withdrawal on a new car
  3. Georgia, 49, to help move from her existing flat into a new house
  4. Liam, 58, after being told his life expectancy is 9 months

Question 3

Omar has been paying in regularly into a Stocks & Shares ISA with Sunshine Savings for the past 4 tax years. He’s now looking to move to a new ISA provider. Which of these best describes the options available?

  1. Omar can’t move to a new provider until next tax year, as he’s making regular payments
  2. Omar can move to a new provider now and continue his regular Stocks & Shares savings, but only if he also transfers all his current year’s subscriptions too
  3. Omar must transfer all of his existing subscriptions, current and from previous years, to be allowed to continue to save in the same tax year
  4. Omar can simply just stop his payments to Sunshine Savings and set up payments into a new provider’s Stocks & Shares ISA for the remainder of the same tax year

Question 4

Jack died in May 2018 and on his death his stocks and shares ISA was valued at £150,000. The administration of Jack’s estate was completed in June 2019 and the value of the funds at that date was £175,000. Jack’s widow, Diane is applying for an APS. Which of the following statements are correct?

  1. The amount of the APS will be £150,000 and there will be no capital gain
  2. The amount of the APS will be £150,000 and there will be a capital gain of £25,000
  3. The amount of the APS will be £175,000 and there is a capital gain of £25,000
  4. The amount of the APS will be £175,000 and there is no capital gain

Check your answers

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