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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am intending to withdraw significant funds from an investment

Resolved Question:

I am intending to withdraw significant funds from an investment bond I have had since 2007, i am intending to loan / give this sum to my daughter, are there any tax implications
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
Have you made any withdrawals from the bond to date? Id the bond a UK investment bond?
Customer: replied 1 year ago.
no this will be the first one
Customer: replied 1 year ago.
yes it is a uk investment bond
Expert:  TonyTax replied 1 year ago.
Thanks.
Leave this with me while I draft my answer.
Expert:  TonyTax replied 1 year ago.
Hi again.
Take a look at HS320 for information on the taxing of investment bond profits:
https://www.gov.uk/government/publications/gains-on-uk-life-insurance-policies-hs320-self-assessment-helpsheet/hs320-gains-on-uk-life-insurance-policies-2015
You are allowed to take 5% of the original investment out of the bond in each policy year without incurring an immediate tax charge. Assuming the policy has run for at least seven full policy years, as you haven't made any withdrawals to date, you could take as much as 35% of the original capital invested out and not incur an immediate tax charge.
If you withdrew more than the accumulated 5% allowances, there would be a chargeable event gain equal to the excess on which basic rate tax will be treated as having been paid. You would divide the gain by 7 to arrive a the "top-slice" and add that to your income for the tax year in which the gain arose. If that top-slice was fully in the higher rate tax band of 40% or 45%, you would have additional tax to pay equal to seven times the tax on the top-slice. The tax liability would be less if only part of the top-slice went into the higher rate tax bands.
If you are a basic rate taxpayer regardless of the addition of the top-slice, then you will have no further tax to pay.
If you lend your daugher the cash, there will be no Inheriatnce Tax implications unless you write it off. If you gift her the cash, then so long as you live for seven years after making the gift, its value will not form part of your estate for IHT purposes.
I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15846
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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