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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a Personal Investment Plan which is due to mature in

Resolved Question:

I have a Personal Investment Plan which is due to mature in 2016. The plan was taken out 10 years ago. I am considering taking out the profits which are in excess of £10,000. I am informed that I require to declare this as income and this would put me into the 40% tax threshold during 2016. Do I require to pay the additional 20% tax on the profits from the P.I.P.  Is there a way of avoiding paying the additional 20% tax

Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

.

Can you tell me who the PIP is with please. Is there life assurance attached? Did you pay a single premium? Have you made any withdrawals to date?

Customer: replied 2 years ago.

The PIP is with Halifax Financial Services and also provides life cover.

I paid one premium in 2006 and have made no withdrawals since that date.

It is my intention to leave the original investment intact and and take any profits

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.
again.

The tax implications of this type of investment are set out in HS320 policies and HS321 -UK policies.

You can withdraw 5% of the original investment each policy year with no immediate tax implications. If you don't use the 5% allowance policy year, you can use it later. After 10 years, you could have withdrawn up to 50% of the original investment and as you haven't made any withdrawals, you can take 55% assuming you are in year 11 and pay no tax.

When your total withdrawals exceed the accumulated allowance, a chargeable event occurs equal to the excess. This is treated as basic rate tax paid so you will have no further tax to pay if you are a basic rate taxpayer when the "top-slice" of the gain is added to your income in the year the chargeable event certificate is issued for. The top-slice is calculated by dividing the gain as shown on the certificate by the number of years since the previous event or the start date of the policy if there have been no chargeable events.

If the policy is a non-UK policy, then the gain won't be treated as basic rate tax paid and you will have tax to pay if your income exceeds the personal allowance and there is a chargeable event gain.

I hope this helps but let me know if you have any further questions.
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