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TonyTax
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We have a Pru fund investment plan which has been in place

Resolved Question:

We have a Pru fund investment plan which has been in place since 2009
Joint with my husband
Initial investment of £9k is now worth approx £14k
Want to cash it in but don't understand Pru's guide to tax on the investment
Both employed - I earn £40k per year - Husband earns approx £30k per year
Pru allow part or whole cash in but don't want to get caught re tax if at all possible
We have never taken any part payments out of this fund in the past
Please can you clarify how much we can take out at any one time (preferably all) before being liable for tax.
I have assumed that the original investment is not liable for tax but please clarify.
Submitted: 8 months ago.
Category: Tax
Expert:  TonyTax replied 8 months ago.

Hi.

Let me take a look at this and I'll get back to you in a bit.

Expert:  TonyTax replied 8 months ago.

Take a look at HS320 if the bond is a UK bond or HS321 if the bond is an offshore bond.

if you cash in the bond after 9 complete years, you will each make a chargeable event gain of £2,500. Assuming the bond is a UK one, the gain will be treasted as having suffered tax at 20%, £500. Your husband is a basic rate taxpayer and will clearly have no tax to pay if the bond is a UK bond. If you divide £2,500 by 9, you get £278 which you should add to your income to see if it takes you into the 40% tax band which starts at £43,000. If it does, then you will have tax to pay of a maximum of £278 @ 20% (40% - 20%) x 9), ie £500.40. If you earn £40,000, you won't be a higher rate taxpayer once you add in the 1/9th of your share of the gain and there will be no tax to pay.

If the bond is an offshore one, then there will be no 20% tax credit treated as paid so you will each have a liability of £500.

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

Expert:  TonyTax replied 7 months ago.

Hi.

I'm just following up to find out if my answer helped or if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15761
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Customer: replied 7 months ago.
Thank you this is very helpfulRegards
Karen Munn

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