With Porfit Bond sting in the tail

missile

I have just received notification of a chargeable event for the with profit bond which I surrendered.

I shall have tax to pay on £30,181.:( I have no idea how they worked out that figure? I recon it was £42,682 but I shall not be querrying it.

I did know that these bonds are tax free for basic rate and higher rate tax payers have a liability. Worth considering your own tax circumstances and top slicing relief when considering when to surrender :think:

http://www.invidion.co.uk/investment_bond_calculator.php

dunstonh

I shall have tax to pay on £30,181.:( I have no idea how they worked out that figure? I recon it was £42,682 but I shall not be querrying it.

Are you sure you have to pay the tax and its not just a chargeable gain certificate?

Have you applied top slicing relief or are you well through the higher rate tax band?

I did know that these bonds are tax free for basic rate and higher rate tax payers have a liability. Worth considering your own tax circumstances and top slicing relief when considering when to surrender :think:

One of the advantages of the investment bond tax wrapper (nothing to do with With Profits as its the wrapper that matters, not the fund - hence your title is a little inaccurate) is that higher rate taxpayers dont have to pay higher rate tax on the investments. If they wait until a time that they are basic rate or lower, then can totally avoid higher rate tax. Even if you do pay higher rate tax you can benefit from gross roll up (by not paying higher rate tax each year you get compounded gain on the tax you havent paid). When you do have to pay it, you end up with a higher value after tax than had you paid it each year.

missile

dunstonh wrote: »

Are you sure you have to pay the tax and its not just a chargeable gain certificate? To give it the full title "Notice of gain for income tax purposes".

Have you applied top slicing relief or are you well through the higher rate tax band? I am aware of top slicing. I am looking through my own tax returns trying to work it out. My link on how to calculate may be of interest to a.n.others.

One of the advantages of the investment bond tax wrapper (nothing to do with With Profits as its the wrapper that matters, not the fund - hence your title is a little inaccurate) is that higher rate taxpayers dont have to pay higher rate tax on the investments. If they wait until a time that they are basic rate or lower, then can totally avoid higher rate tax. Even if you do pay higher rate tax you can benefit from gross roll up (by not paying higher rate tax each year you get compounded gain on the tax you havent paid). When you do have to pay it, you end up with a higher value after tax than had you paid it each year.

Thread is not about WPB and I would suggest my title is spot on. I should have considered my own tax liabilty and top slicing relief before surrender. To be honest, as soon as I saw zero MRV I was just glad to get shot.

dunstonh

hread is not about WPB and I would suggest my title is spot on.

I was only pointing out that its not the with profits fund that has created the potential liability. Its he use of a non-qualifying, whole of life assurance tax wrapper that has. It could have been in any unit linked fund and the tax rules would apply.

missile

dunstonh wrote: »

I was only pointing out that its not the with profits fund that has created the potential liability. Its he use of a non-qualifying, whole of life assurance tax wrapper that has. It could have been in any unit linked fund and the tax rules would apply.

Indeed, thanks for your comments:T