tax on bonds - how is this liability due?

RedDragon22

Hoping for a bit of expertise on bonds

Client is 83, Current income of £10k

1. Invested £15k in with prfots bond in 1994, withdrawal of £15k in 2005 and full encashment of £27k in 2009
2. Invested £18k in with profits bond in 1997, withdrawal of £600pa from commencement, and full encashment £20k in 2009
Question 1 - These bonds are taxed BRT as they go... .correct?
Question 2 - The gain on the bonds is roughly £27k for bond 1 and £9k for bond 2. This gain is over the years of the bonds though
So how is a tax liability due at present, company one are saying £2500 tax is due... why?
What am I missing?

Reaper

Somebody more knowledable will be along soon but assuming you are talking about a With Profits Endowment type policy I believe you should be able to extract 5%pa tax free and the proceeds are tax free provided it is kept running for more than 10 years. So I don't think there should be any tax bill - unless the client was a higher rate tax payer while they were drawing out the regular amounts in which case I think they have to pay the difference now.

However I'm on shaky ground as I've never owned a With Profits policy so wait for confirmation from somebody else.