Thanks.Given the type of policy it is, can you confirm that it is a UK bond as opposed to an offshore bond? When exactly did you withdraw £7,000?
Hi again.Take a look here for information on chargeable event gains.You can take 5% of your original investment out in any one policy year tax free. Any part of an unused 5% allowance that isn't used can be taken in a later policy year. As you have taken £8,750 by the end of policy year 6 in March 2015, you are £1,750 below your accumulated allowance of £10,500.If you cashed in the bond completely now in policy year 7, you would make a gain of £18,750 (£45,000 + £8,750 - £35,000). That will have accrued over 6 complete policy years, ie £3,125 per policy year. However, you wouldn't benefit from top slicing relief as you appear to be a 40% taxpayer.As you appear to be a 40% taxpayer with earnings over £42,385, a chargeable event gain of £18,750 would be taxed at 40% (£7,500) with credit being given for the basic rate tax treated as paid (£3,750) so you would be left with a net income tax liability of £3,750.If you took £16,000 out now, there would be a chargeable event gain of £12,500 on which you would pay income tax of £2,500 (£16,000 - (£35,000 x 5% x 7 - £8,750) x (40% - 20%).In order to leave you with £16,000 net of tax, you would need to be looking to withdraw around £19,200 which would leave you with a gain of £15,700 (£19,200 - (£35,000 x 5% x 7 -£8,750) on which you would pay income tax of £3,140 to leave you with £16,060.I hope this helps but let me know if you have any further questions.