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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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What are the tax implications in an investment

Resolved Question:

What are the tax implications for cashing in an investment 10 years old, which is currently invested in gilts and fixed interest units, which I am advised will not perform very well in 2016, the initial investment was £40,000 and currently stands at £66,000, we are standard rate taxpayers but are unsure of any tax free investment profits yearly
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
Can you tell me if this is a single premium investment bond which has life assurance attached? If so, have you made any withdrawals? If not, can you tell me what form the investment is in please.
Customer: replied 1 year ago.
This was a personal investment plan, which was set up with 100 identical plans to help manage any withdrawals, the plan also provides life cover and includes loyalty bonus payable for each completed 5 year period the plan is in force. no withdrawals have been made to date
Expert:  TonyTax replied 1 year ago.
Thanks. Leave this with me while I draft my answer. It will take a while som please bear with me.
Customer: replied 1 year ago.
The investment is in the form of Gilt and fixed interest units and index-linked Gilt
Expert:  TonyTax replied 1 year ago.
Hi. You should referr to HS230 in the case of a UK investment bond and HS321 in the case of an offshore investment bond. If you cashed in the entire bond, you would make a chargeable event gain of £26,000, £13,000 for each of the two beneficial owners if there are indeed two. Each of you would only have a liability to higher rate tax in the case of a UK bond if the top-slice of the gain which is £1,300 (£13,000 / 10 completed policy years) took you into the 40% tax band when added to your other income for the tax year of surrender. The gain on a UK bond is treasted as basic rate tax paid. The tax could be as low as £0 or as high as £2,600 if all the top slice was taxable at 40% (£13,000 / 10 x 20% (40% - 20%) x 10) or £3,250 if all the top-slice was taxable at 45% (£13,000 / 10 x 25% (45% - 20%) x 10). If none of the top-slice took you into the 40% tax band, there would be no tax to pay. If the bond is an offshore bind, then there is no basic rate tax credit and so you will have a liability to tax assuming you have income in excess of the personal allowance. I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15763
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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