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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a number of investment bonds that my adviser is

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I have a number of investment bonds that my adviser is suggesting that I encash. The total gains are £209,000. They have been held between 12-19 years. My total income is £25,515 and taxable income is £14,915
I am concerned that I could lose my personal allowance from what I have read?


I can confirm that you will lose your personal allowance if you make chargeable event gains of £209,000 in the current tax year as your "adjusted net income" will exceed £122,000. Take a look here and here for more information on that. Whilst the first link doesn't specifically mention the type of gain you have, the second does. I've also put a large chargeable event gain into my own tax return and that confirms what I've said here. The only way you can avoid losing your personal allowance is to spread the gains over more than one tax year I'm afraid.

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

Customer: replied 1 year ago.
Thank you for your reply. Am I to assume therefore that if I select the bonds that have gains that when added to my taxable income then total less than £122,000 I should be okay?

Not quite.

You lose £1 of the personal allowance for every £2 of income over £100,000 so its a gradual clawback. The personal allowance is £11,000 for 2016/17.

Customer: replied 1 year ago.
Okay. So I need to encash bonds that when added to my taxable income are less than £100K if I have understood you correctly?

Let me just check something and I'll get back to you in a bit.

Customer: replied 1 year ago.
Okay. Thanks

You need to keep your gross income at £100,000 or less for 2016/17 if you want to retain all your personal allowance. You say your income is £25,515 so you need to restrict your chargeable event gains to less than £75,000 in 2016/17.

Whilst the gains are top-sliced when assessing your tax liability, the gross gains are taken into account when calculating your entitlement to the personal allowance.

Customer: replied 1 year ago.
This is becoming much clearer, thanks. So for example two of my bonds have total gains of £39,885 (Held 12yrs) and £31,164 (held 13yrs) respectively. I can then divide each gain by years held £3,328 and £2,397 and then add it to the £25,515 and therefore have no tax to pay? If my reading is correct???

That would be correct so long as they are UK bonds and the gains are treated as basic rate tax paid which they will be if they are UK bonds.

Customer: replied 1 year ago.
They are UK bonds so I think I am there. Thank you very much for your help. I will give you 5 stars Tony.
Customer: replied 1 year ago.
Is it possible to be emailed a transcript of this conversation for records purposes?

You could ask just answer to do that. Alternatively, save the webpage address into an email to yourself. The question will remain open to you for as long as you like.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Good idea and duly done. Thanks for your time.