ACCA Strategic Professional · Advanced Taxation (UK) · Investment and other expenditure that reduces tax liabilities
Priya, a UK resident higher rate taxpayer, wants to invest in a way that makes her investment income and gains free of UK tax. She has not yet used any of her ISA allowance for the current tax year. What is the overall ISA investment limit for the tax year?
The overall ISA investment limit is £20,000 for the tax year. Income and gains inside an ISA are free of UK tax. The other figures belong to different reliefs: £7,500 is rent-a-room relief, £3,000 is the CGT exempt amount and £1,000,000 is the BADR lifetime limit.
- A£7,500
- B£20,000Correct
- C£3,000
- D£1,000,000
Explanation
The overall ISA investment limit is £20,000 per tax year, which can be split between the different types of ISA. £7,500 is the rent-a-room limit, £3,000 is the CGT annual exempt amount and £1,000,000 is the BADR lifetime limit, so they are wrong.
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