R02 ISAs and purchased life annuities: free practice questions

1. Question 1 of 5

   What is the overall annual ISA subscription limit in 2026/27, and how much of it can go into a Lifetime ISA?

   Option A: £4,000, with up to £1,000 in a Lifetime ISAOption B: £20,000, with up to £9,000 in a Lifetime ISAOption C: £20,000, with up to £4,000 in a Lifetime ISAOption D: £9,000, with up to £4,000 in a Lifetime ISA

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   The answer is C: £20,000, with up to £4,000 in a Lifetime ISA

   In 2026/27, an adult can subscribe up to £20,000 across cash, stocks and shares, innovative finance and Lifetime ISAs, with up to £4,000 in a Lifetime ISA.

   Why the other options are wrong

   A

   £1,000 is the maximum Lifetime ISA bonus.

   B

   £9,000 is the Junior ISA limit.

   D

   £9,000 is the Junior ISA limit.

2. Question 2 of 5

   Who can open a Lifetime ISA?

   Option A: Anyone under 50Option B: UK residents aged 16 or over, with no upper age limitOption C: UK residents aged 18 or over but under 40Option D: Only first-time buyers aged over 40

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   The answer is C: UK residents aged 18 or over but under 40

   A Lifetime ISA must be opened between 18 and 39. Contributions of up to £4,000 a year can continue until 50.

   Why the other options are wrong

   A

   Contributions can continue to 50, but accounts must be opened before 40.

   B

   A Lifetime ISA holder must be at least 18 when opening it.

   D

   It must be opened before 40.

3. Question 3 of 5

   What is the maximum time for transferring a stocks and shares ISA between managers?

   Option A: 30 working daysOption B: 5 working daysOption C: 90 calendar daysOption D: 15 working days

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   The answer is A: 30 working days

   Transfers should take no longer than 15 working days for cash ISAs and cash Lifetime ISAs, and 30 working days for stocks and shares ISAs and innovative finance ISA investments.

   Why the other options are wrong

   B

   That's too short.

   C

   That's the SAYE share transfer window.

   D

   That's the limit for cash ISAs.

4. Question 4 of 5

   Which statement about Junior ISAs is correct?

   Option A: Children with a CTF can also hold oneOption B: Up to £20,000 a year, with withdrawals allowed from age 16Option C: Only the child's parents are allowed to pay money inOption D: Up to £9,000 a year in 2026/27, with no withdrawals before 18

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   The answer is D: Up to £9,000 a year in 2026/27, with no withdrawals before 18

   UK-resident children without a CTF can have a cash and a stocks and shares Junior ISA, with up to £9,000 a year in total. Children manage them from 16, but can't withdraw until 18, except for terminal illness or death.

   Why the other options are wrong

   A

   Children with a CTF aren't eligible, although a CTF can be transferred.

   B

   The limit is £9,000; withdrawals wait until 18.

   C

   Anyone can contribute.

5. Question 5 of 5

   How are payments from a purchased life annuity taxed?

   Option A: The capital element is tax-free; the income element is savings incomeOption B: The whole payment is tax-free, as it's bought with capitalOption C: The whole payment is subject to CGTOption D: The whole payment is taxed as earned income under PAYE each year

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   The answer is A: The capital element is tax-free; the income element is savings income

   Each PLA payment has a capital element, treated as a return of the purchase price and tax-free, and an income element, taxed as savings income. Pension annuities are taxed in full.

   Why the other options are wrong

   B

   The income element is taxable.

   C

   Annuity payments aren't capital gains.

   D

   That's how pension annuities are taxed.

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