ACCA Advanced Taxation (ATX) Practice Exam

What are the eligibility requirements to invest in an Individual Savings Account (ISA)?

1. The individual must be at least 18 years old and a UK resident.

2. The individual must be 16 or older and a UK resident.

3. There are no age restrictions for investments.

4. Individuals must be a non-resident of the UK.

The correct answer is: The individual must be 16 or older and a UK resident.

The eligibility requirements for investing in an Individual Savings Account (ISA) specify that individuals must be at least 16 years old and a UK resident. This means that anyone who is 16 or older, and who resides in the UK, can open a cash ISA. However, for a stocks and shares ISA, the minimum age increases to 18. The specified minimum age of 16 allows younger individuals to begin saving in a tax-efficient manner from an early age, promoting financial literacy and savings habits. Additionally, being a UK resident ensures that the tax benefits associated with ISAs are only available to those who contribute to the UK economy. The other options present situations that do not align with the established eligibility criteria for ISAs. For example, stating that there are no age restrictions is inaccurate, as there are clear minimum age requirements. Similarly, the option that suggests individuals must be a non-resident is incorrect, as non-residents do not qualify for ISAs, which are specifically designed for UK residents to encourage savings.