Friday Five Focus on Taxation – 5 Questions in 5 Minutes – 30 Oct 2026

Friday Five Focus on Taxation – 5 Questions in 5 Minutes Every Friday

What’s this all about?

Each week, we ask questions relating to one of these topics: Investments, Taxation, Pensions, Protection, or Regulation. This week, our Friday Five is relevant to Taxation; this is useful as you prepare for the CII’s R03 or AF1 exams. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

IMPORTANT! These questions relate to examinable tax year 2026/27, examinable by the CII until 31 August 2027.

1. Geraldine died in the 2004/2005 tax year using 40% of the then standard nil rate band for Inheritance Tax of £263,000. If her husband dies in this tax year, how much standard nil rate band can be applied for by his personal representatives?
   1. £325,000
   2. £430,200
   3. £482,800
   4. £520,000

2. Maureen, a basic-rate taxpayer, has just invested £50,000 into a guaranteed income bond that has been constructed by the provider using a medium-term note. She should be aware that: (Tick all that apply.)
   1. her personal savings allowance can be used to reduce the amount of Income Tax payable.
   2. any chargeable gains are subject to Capital Gains Tax in the normal way.
   3. her Income Tax liability will be met at source with a 20% tax credit.
   4. products constructed in this way cannot be held in an ISA wrapper.

3. Simon makes payments to his occupational pension scheme by deduction from his pay. What is this method known as?
   1. Net pay arrangement.
   2. Relief at source.
   3. Gross pay arrangement.
   4. Relief by claim.

4. Maggie and John are reviewing their wills and contemplating including a trust for ‘bereaved minors’ as they have two young children. They should be aware that these types of trust
   1. are subject to an exit charge at age 18.
   2. are subject to a 10-yearly periodic charge.
   3. must give an absolute interest at age 18.
   4. must give an interest in possession at age 18.

5. Ben has recently died having run his landscape gardening business as a sole trader for 15 years. He has left the business with a value of £500,000 to his son Charlie. Which of the following is true regarding the Inheritance Tax position of Ben’s business?
   1. Agricultural relief can be claimed at 50%.
   2. Business relief can be claimed at 50%.
   3. Agricultural relief can be claimed at 100%.
   4. Business relief can be claimed at 100%.

Answers

1. D; See R03 Study Text, Chp 4; Rationale: Geraldine’s husband’s legal personal representatives can apply for his standard nil rate band of £325,000, plus Geraldine’s unused standard nil rate band at 60% of £325,000 = £195,000, giving a combined standard nil rate band total of £520,000.
2. AB; See R03 Study Text, Chp 10; Rationale: Income is taxed as savings income, meaning Maureen’s £1,000 personal savings allowance is available (if not used elsewhere). Chargeable gains are subject to CGT. The income is paid gross, so there is no tax credit. This type of structured product can be held in an ISA wrapper.
3. A; See R03 Study Text, Chp 1; Rationale: Employee contributions to occupational schemes are usually deducted before calculating tax under the net pay arrangement.
4. C; See R03 Study Text, Chp 4; Rationale: A trust for a bereaved minor must give an absolute interest in the trust property at the age of 18. This means that if the trust comes into effect as a result of their deaths, their daughters will have full access to the trust property once they turn 18.
5. D; See R03 Study Text, Chp 4; Rationale: 100% business relief is available to sole traders, providing the business has been owned for two years and the value is within the £2.5m allowance.

Grab the resources you need!

R03 questions often come down to applying the rules correctly and avoiding small but costly errors. If you’d like to see how our full R03 E-Mocks present these topics in an exam setting, get access to the free R03 E-Mocks taster to preview the question style, layout and level of detail included in the complete set.

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